INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA LIFE INSURANCE AND ANNUITY COMPANY,
a Connecticut corporation (the "Adviser") and AETNA INCOME SHARES, a
Massachusetts business trust (the "Fund"), as of the date set forth below.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered with the Commission as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is in the business of acting as an investment adviser; and
WHEREAS, the Fund and the Adviser desire to enter into an agreement to provide
for investment advisory and management services for the Fund on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement and the policies and
control of the Fund's Board of Trustees (the "Board"), the Fund hereby appoints
the Adviser to serve as the investment adviser to the Fund, to provide the
investment advisory services set forth below in Section II. The Adviser agrees
that, except as required to carry out its duties under this Agreement or
otherwise expressly authorized, it is acting as an independent contractor and
not as an agent of the Fund and has no authority to act for or represent the
Fund in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the following:
1. supervise all aspects of the operations of the Fund;
2. select the securities to be purchased, sold or exchanged by the
Fund or otherwise represented in the Fund's investment portfolio,
place trades for all such securities and regularly report thereon
to the Board;
3. formulate and implement continuing programs for the purchase and
sale of securities and regularly report thereon to the Board;
4. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally, the
Fund, securities held by or under consideration for the Fund, or
the issuers of those securities;
5. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's
performance of its duties hereunder;
6. obtain the services of, contract with, and provide instructions to
custodians and/or subcustodians of the Fund's securities, transfer
agents, dividend paying agents, pricing services and other service
providers as are necessary to carry out the terms of this Agreement;
7. prepare financial and performance reports, calculate and report
daily net asset values, and prepare any other financial data or
reports, as the Adviser from time to time, deems necessary or as
are requested by the Board; and
8. take any other actions which appear to the Adviser and the Board
necessary to carry into effect the purposes of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the Fund as follows:
1. Due Incorporation and Organization. The Adviser is duly
organized and is in good standing under the laws of the
State of Connecticut and is fully authorized to enter
into this Agreement and carry out its duties and
obligations hereunder.
2. Registration. The Adviser is registered as an investment
adviser with the Commission under the Advisers Act, and is
registered or licensed as an investment adviser under the
laws of all jurisdictions in which its activities require
it to be so registered or licensed. The Adviser shall
maintain such registration or license in effect at all
times during the term of this Agreement.
3. Best Efforts. The Adviser at all times shall provide its
best judgment and effort to the Fund in carrying out its
obligations hereunder.
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B. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly
formed as a business trust under the laws of the
Commonwealth of Massachusetts and it is authorized to
enter into this Agreement and carry out its obligations
hereunder.
2. Registration. The Fund is registered as an investment
company with the Commission under the 1940 Act and shares
of the Fund are registered for offer and sale to the
public under the Securities Act of 1933, as amended
(the "1933 Act") and all applicable state securities laws.
Such registrations will be kept in effect during the term
of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
A. Appointment of Subadviser
Subject to the approval of the Board and the shareholders of the Fund,
the Adviser may enter into a Subadvisory Agreement to engage a
subadviser (the "Subadviser") to the Adviser with respect to the Fund.
B. Duties of Subadviser
Under a Subadvisory Agreement, the Subadviser may be delegated some or
all of the following duties of the Adviser:
1. select the securities to be purchased, sold or exchanged by
the Fund or otherwise represented in the Fund's investment
portfolio, place trades for all such securities and
regularly report thereon to the Board;
2. formulate and implement continuing programs for the
purchase and sale of the securities of such issuers and
regularly report thereon to the Board;
3. obtain and evaluate pertinent information about
significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether
affecting the economy generally, the Fund, securities held
by or under consideration for the Fund, or the issuers of
those securities;
4. provide economic research and securities analyses as the
Adviser considers necessary or advisable in connection
with the Adviser's performance of its duties hereunder;
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5. give instructions to the custodian and/or sub-custodian of
the Fund appointed by the Board, as to deliveries of
securities, transfers of currencies and payments of cash
for the Fund as required to carry out the investment
activities of the Fund, in relation to the matters
contemplated by this Agreement; and
6. provide such financial support, administrative services
and other duties as the Adviser deems necessary and
appropriate.
C. Duties of the Adviser
In the event the Adviser delegates certain responsibilities hereunder
to a Subadviser, the Adviser shall, among other things:
1. monitor the investment program maintained by the
Subadviser for the Fund and the Subadviser's compliance
program to ensure that the Fund's assets are invested in
compliance with the Subadvisory Agreement and the Fund's
investment objectives and policies as adopted by the Board
and described in the most current effective amendment of
the registration statement for the Fund, as filed with the
Commission under the 1933 Act and the 1940 Act
("Registration Statement");
2. review all data and financial reports prepared by the
Subadviser to assure that they are in compliance with
applicable requirements and meet the provisions of
applicable laws and regulations;
3. establish and maintain regular communications with the
Subadviser to share information it obtains with the
Subadviser concerning the effect of developments and data
on the investment program maintained by the Subadviser; and
4. oversee all matters relating to the offer and sale of the
Fund's shares, the Fund's corporate governance, reports to
the Board, contracts with all third parties on behalf of
the Fund for services to the Fund, reports to regulatory
authorities and compliance with all applicable rules and
regulations affecting the Fund's operations.
V. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities for the Fund with brokers or
dealers selected by the Adviser, which may include
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brokers or dealers affiliated with the Adviser. The Adviser shall use
its best efforts to seek to execute portfolio transactions at prices
that are advantageous to the Fund and at commission rates that are
reasonable in relation to the benefits received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the
other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser may also select brokers or dealers
to effect transactions for the Fund who provide payment for expenses of
the Fund. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services or expenses, a commission
for executing a portfolio transaction for the Fund that is in excess of
the amount of commission another broker or dealer would have charged
for effecting that transaction if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or
dealer and is paid in compliance with Section 28(e) or other rules and
regulations of the Commission. This determination may be viewed in
terms of either that particular transaction or the overall
responsibilities that the Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Board
shall periodically review the commissions paid by the Fund to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits received.
VI. CONTROL BY THE BOARD OF TRUSTEES
Any investment program undertaken by the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Adviser on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the Board.
VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
1. all applicable provisions of the 1940 Act, the Advisers Act and
any rules and regulations adopted thereunder;
2. all policies and procedures of the Fund as adopted by the Board
and as described in the Registration Statement;
3. the provisions of the Fund's Declaration of Trust, as amended;
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4. the provisions of the Bylaws of the Fund, as amended; and
5. any other applicable provisions of state and federal law.
VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Fund shall pay to the Adviser an annual fee, payable
monthly, equal to .40% of the average daily net assets of the Fund. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily at the rate of 1/365 of .40% of the daily net assets of the Fund.
If this Agreement becomes effective subsequent to the first day of a month or
terminates before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees set forth above. Subject to the provisions of
Section X hereof, payment of the Adviser's compensation for the preceding month
shall be made as promptly as possible. For so long as a Subadvisory Agreement is
in effect, the Fund acknowledges that the Adviser will pay to the Subadviser, as
compensation for acting as Subadviser to the Fund, the fees specified in the
Subadvisory Agreement.
IX. EXPENSES
The expenses in connection with the management of the Fund shall be allocated
between the Fund and the Adviser as follows:
A. Expenses of the Adviser
The Adviser shall pay:
1. the salaries, employment benefits and other related costs
and expenses of those of its personnel engaged in providing
investment advice to the Fund, including without
limitation, office space, office equipment, telephone and
postage costs;
2. all fees and expenses of all Trustees, officers and
employees, if any, of the Fund who are employees of the
Adviser or an affiliated entity, including any salaries and
employment benefits payable to those persons;
B. Expenses of the Fund
The Fund shall pay:
1. investment advisory fees pursuant to this Agreement;
2. brokers' commissions, issue and transfer taxes or other
transaction fees payable in connection with any
transactions in the securities in the Fund's
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investment portfolio or other investment transactions
incurred in managing the Fund's assets, including portions
of commissions that may be paid to reflect brokerage
research services provided to the Adviser;
3. fees and expenses of the Fund's independent accountants and
legal counsel and the independent Trustees' legal counsel;
4. fees and expenses of any administrator, transfer agent,
custodian, dividend, accounting, pricing or disbursing
agent of the Fund;
5. interest and taxes;
6. fees and expenses of any membership in the Investment
Company Institute or any similar organization in which the
Board deems it advisable for the Fund to maintain
membership;
7. insurance premiums on property or personnel (including
officers and Trustees) of the Fund which benefit the Fund;
8. all fees and expenses of the Fund's Trustees, who are not
"interested persons" (as defined in the 0000 Xxx) of the
Fund or the Adviser;
9. expenses of preparing, printing and distributing proxies,
proxy statements, prospectuses and reports to shareholders
of the Fund, except for those expenses paid by third
parties in connection with the distribution of Fund shares
and all costs and expenses of shareholders' meetings;
10. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares
of the Fund or in cash;
11. costs and expenses of promoting the sale of shares in the
Fund, including preparing prospectuses and reports to
shareholders of the Fund, provided, nothing in this
Agreement shall prevent the charging of such costs to third
parties involved in the distribution and sale of Fund
shares;
12. fees payable by the Fund to the Commission or to any state
securities regulator or other regulatory authority for the
registration of shares of the Fund in any state or
territory of the United States or in the District of
Columbia;
13. all costs attributable to investor services, administering
shareholder accounts and handling shareholder relations,
(including, without limitation, telephone and personnel
expenses), which costs may also be charged to third parties
by the Adviser; and
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14. any other ordinary, routine expenses incurred in the
management of the Fund's assets, and any nonrecurring or
extraordinary expenses, including organizational expenses,
litigation affecting the Fund and any indemnification by
the Fund of its officers, Trustees or agents.
X. EXPENSE LIMITATION
If, for any fiscal year, the total of all ordinary business expenses payable by
the Fund, including all investment advisory fees but excluding brokerage
commissions, distribution fees, taxes, interest and extraordinary expenses and
certain other excludable expenses, would exceed the most restrictive expense
limits imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are offered for sale (unless a waiver is obtained), the
Adviser shall reduce its advisory fee to the extent necessary to meet such
expense limit, but the Adviser will not be required to reimburse the Fund for
any ordinary business expenses which exceed the amount of its advisory fee for
such fiscal year. The amount of any such reduction is to be borne by the Adviser
and shall be deducted from the monthly advisory fee otherwise payable to the
Adviser during such fiscal year. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.
XI. ADDITIONAL SERVICES
Upon the request of the Board, the Adviser may perform certain accounting,
shareholder servicing or other administrative services on behalf of the Fund
that are not required by this Agreement. Such services will be performed on
behalf of the Fund and the Adviser may receive from the Fund such reimbursement
for costs or reasonable compensation for such services as may be agreed upon
between the Adviser and the Board on a finding by the Board that the provision
of such services by the Adviser is in the best interests of the Fund and its
shareholders. Payment or assumption by the Adviser of any Fund expense that the
Adviser is not otherwise required to pay or assume under this Agreement shall
not relieve the Adviser of any of its obligations to the Fund nor obligate the
Adviser to pay or assume any similar Fund expense on any subsequent occasions.
Such services may include, but are not limited to, (a) the services of a
principal financial officer of the Fund (including applicable office space,
facilities and equipment) whose normal duties consist of maintaining the
financial accounts and books and records of the Fund and the services (including
applicable office space, facilities and equipment) of any of the personnel
operating under the direction of such principal financial officer; (b) the
services of staff to respond to shareholder inquiries concerning the status of
their accounts, providing assistance to shareholders in exchanges among the
investment companies managed or advised by the Adviser, changing account
designations or changing addresses, assisting in the purchase or redemption of
shares; or otherwise providing services to shareholders of the Fund; and (c)
such other administrative services as may be furnished from time to time by the
Adviser to the Fund at the request of the Board.
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XII. NONEXCLUSIVITY
The services of the Adviser to the Fund are not to be deemed to be exclusive,
and the Adviser shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other activities,
so long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers and directors of the Adviser may serve as
officers or trustees of the Fund, and that officers or trustees of the Fund may
serve as officers or directors of the Adviser to the extent permitted by law;
and that the officers and directors of the Adviser 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 or trustees of any
other firm or trust, including other investment companies.
XIII. TERM
This Agreement shall become effective at the close of business on July 31, 1996,
and shall remain in force and effect through December 31, 1997, unless earlier
terminated under the provisions of Article XV.
XIV. RENEWAL
Following the expiration of its initial term, the Agreement shall continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
1. a. by the Fund's trustees, or
b. by the vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and
2. by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a trustee of the Fund), by votes cast in
person at a meeting specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's trustees or by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by the Adviser, on sixty (60) days' written notice to the other party. The
notice provided for herein may be waived by the party required to be notified.
This
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Agreement shall automatically terminate in the event of its "assignment",
as that term is defined in Section 2(a)(4) of the 1940 Act.
XVI. LIABILITY
A. Liability of the Adviser
The Adviser shall be liable to the Fund and shall indemnify the Fund
for any losses incurred by the Fund, whether in the purchase, holding
or sale of any security or otherwise, to the extent that such losses
resulted from an act or omission on the part of the Adviser or its
officers, Trustees or employees, that is found to involve willful
misfeasance, bad faith or negligence, or reckless disregard by the
Adviser of its duties under this Agreement, in connection with the
services rendered by the Adviser hereunder.
B. Liability of the Fund, the Shareholders and the Trustees
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the trustees of the
Fund as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees or shareholders
individually but are binding only upon the assets and property of the
Fund. No provision of this Agreement shall be construed to protect any
trustees or officer of the Fund or director or officer of the Adviser,
from liability in violation of Section 17(h) and (i) of the 1940 Act.
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such addresses shall be:
if to the Fund or the Adviser:
000 Xxxxxxxxxx Xxxxxx, XX0X
Xxxxxxxx, Xxxxxxxxxxx 00000
Fax number: 860/000-0000
Attention: Secretary
XVIII. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise
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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, regulations or orders of the Commission issued
pursuant to the 1940 Act. In addition, where the effect of a requirement of the
1940 Act reflected in the provisions of this Agreement is revised by rule,
regulation or order of the Commission, such provisions shall be deemed to
incorporate the effect of such rule, regulation or order.
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XIX. SERVICE XXXX
The service xxxx of the Fund and the name "Aetna" have been adopted by the Fund
with the permission of Aetna Life and Casualty Company and their continued use
is subject to the right of Aetna Life and Casualty Company to withdraw this
permission in the event the Adviser or another subsidiary or affiliated
corporation of Aetna Life and Casualty Company should not be the investment
adviser of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 1st day of August, 1996.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
Attest:
/s/ XxXxx X. Xxxxxxxxx
----------------------
De Xxx X. Xxxxxxxxx
Assistant Corporate Secretary
AETNA INCOME SHARES
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Attest: Title: President
/s/ Xxxxx X. Xxxxxx
-------------------
Xxxxx X. Xxxxxx
Secretary
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