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Custodian Agreement
between
Mellon Bank, N.A.
and
Aetna Variable Portfolios, Inc.
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INDEX
Page
1. Appointment...................................................2
2. Application of this Agreement.................................2
3. Delivery of Documents.........................................3
4. Definitions...................................................4
5. Delivery and Registration of the Property.....................6
6. Receipt and Disbursement of Money.............................6
7. Receipt of Securities; Subcustodian...........................7
8. Use of Book-Entry System......................................8
9. Instructions Consistent with Charter, Etc.....................9
10. Transactions Not Requiring Instructions......................10
11. Transactions Requiring Instructions..........................12
12. Segregated Accounts; Securities Lending......................13
13. Dividends and Distributions..................................16
14. Purchases of Securities......................................16
15. Sales of Securities..........................................17
16. Records......................................................17
17. Reports......................................................18
18. Cooperation with Accountants.................................19
19. Confidentiality..............................................19
20. Right to Receive Advice......................................19
21. Compensation.................................................20
22. Indemnification..............................................21
23. Responsibility of the Bank...................................21
24. Collections..................................................23
25. Duration and Termination.....................................24
26. Notices......................................................26
27. Further Actions..............................................26
28. Amendments...................................................26
29. Counterparts.................................................27
30. Miscellaneous................................................27
EXHIBIT A........................................................1
i
CUSTODIAN AGREEMENT
THIS AGREEMENT is made by and between AETNA VARIABLE PORTFOLIOS, INC., a
Maryland corporation (the "Company"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Company is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company is authorized to issue one or more series of shares,
each of which represents a separate investment portfolio, and which may create
additional series in the future; and
WHEREAS, the Company currently has authorized four series, entitled Aetna
Variable Index Plus Portfolio, Aetna Variable Small Company Portfolio, Aetna
Variable Capital Appreciation Portfolio, and Aetna Variable Growth Portfolio
(each individually a "Fund" and collectively the "Funds"); and
WHEREAS, Aetna Life Insurance and Annuity Company ("Adviser") will serve as
investment adviser to the Funds pursuant to Investment Advisory Agreements
between the Fund, on behalf of each of the Funds, and the Adviser; and
WHEREAS, the Company and the Adviser desire to retain the Bank to serve as
the custodian for each of the Funds, as well as for some or all of any
additional series created by the
Fund in the future, and the Bank is willing to serve as custodian for each of
the Funds set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment
The Company hereby appoints the Bank to act as custodian of the portfolio
securities, cash and other property belonging to the Funds for the period and on
the terms set forth in this Agreement. The Bank accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Paragraph 21 of this Agreement. The Bank agrees to comply with
all relevant provisions of the 1940 Act and applicable rules and regulations
thereunder. It is understood that each of the Funds represent a separate
investment portfolio of the Company and, accordingly, that the Bank shall
identify to each such Fund Property belonging to such Fund and in such reports,
confirmations and notices to the Company called for under this Agreement shall
identify the Fund to which such report, confirmation or notice pertains.
2. Application of this Agreement
(a) It is expressly understood that the Company is entering into this
Agreement on behalf of each Fund individually and not jointly with any other
Fund. The responsibilities and benefits set forth in this Agreement shall refer
to each Fund severally and not jointly.
(b) Any breach of this Agreement regarding the Company with respect to
any Fund shall not create a right or obligation with respect to any other Fund.
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(c) Under no circumstances shall the Bank have the right to set off
claims relating to a Fund by applying Property of any other Fund. No Fund shall
have the right to set off against the assets held by any other Fund.
(d) The business and contractual relationships created by this
Agreement and the consequences of such relationships relate solely to the
particular Fund to which such relationship was created. All Property held by the
Bank on behalf of a particular Fund shall relate solely to that particular Fund.
3. Delivery of Documents
The Company has furnished the Bank with copies properly certified or
authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of the Bank as custodian of the portfolio securities, cash and other
property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the
Company's officers and/or officers of the Fund's Adviser authorized to issue
Oral Instructions and to sign Written Instructions, as hereinafter defined, on
behalf of the Fund;
(c) The Company's Articles of Incorporation as filed with the
Department of Assessments and Taxation of the State of Maryland and all
amendments thereto (such Articles of Incorporation, as presently in effect and
as they shall from time to time be amended, are herein called the "Charter");
3
(d) The Company's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) The Investment Advisory Agreement currently in effect (the
"Advisory Agreement") between each of the Funds and its Adviser; and
(f) The Company's most recent prospectus and statement of additional
information relating to shares of the Company's Common Stock ("Shares") (such
prospectus and statement of additional information as presently in effect and
all amendments and supplements thereto are herein called the "Prospectus");
The Company will furnish the Bank from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
4. Definitions
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Company or the Adviser
(whether or not any such person is an officer or employee of the Company): (i)
who is duly authorized by the Board of Directors of the Company or under the
terms of the Advisory Agreement, the Charter or the By-Laws, as each may from
time to time be amended, to act on behalf of the Fund; and (ii) whose name is
listed on the Certificate annexed hereto as Appendix A or any amendment thereto
as may be received by the Bank from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry
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system maintained by a clearing agency registered with the Securities and
Exchange Commission (the "SEC") under Section 17A of the Securities Exchange Act
of 1934 (the "1934 Act") and authorized to act as a depository for the Company's
portfolio securities by the Company's Board of Directors including, without
limitation, Participants Trust Company, Depository Trust Company, CEDEL and
Euroclear, and their respective successor or successors and nominee or nominees.
(c) "Cash" or "Money" or "Monies" shall mean all uninvested funds (in
the form of currency or checks) but shall not include funds represented by cash
equivalents such as repurchase agreements, certificates of deposit, Treasury
bills or notes, or similar instruments.
(d) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Bank from an
Authorized Person or from a person reasonably believed by the Bank to be an
Authorized Person. The Company agrees to deliver to the Bank, at the time and in
the manner specified in Paragraph 8(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(e) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property which the Fund may
from time to time deposit, or cause to be deposited, with the Bank or which the
Bank may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the
Company, which are received by the Bank from time to time from or on behalf of
the Company.
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(f) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand (including
Federal Express or other express courier), certified or registered mail, return
receipt requested, tested telegram, cable, telex or facsimile sending device,
received by the Bank and signed by an Authorized Person and shall also include
computer transmission with coded access as agreed upon by the Bank and the
Company.
5. Delivery and Registration of the Property
The Company will deliver or cause to be delivered to the Bank all
securities and all moneys owned by it, including cash received for the issuance
of Shares, at any time during the period of this Agreement. The Bank will not be
responsible for such securities and such moneys until actually received by it.
All securities delivered to the Bank (other than in bearer form) shall be
registered in the name of the Company or in the name of a nominee of the Company
or in the name of any nominee of the Bank (with or without indication of
fiduciary status), or in the name of any sub-custodian or any nominee of any
such sub-custodian appointed pursuant to Paragraph 7 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Bank.
6. Receipt and Disbursement of Money
(a) Not less frequently than once on the afternoon of each business day,
all cash held in the custody account, other than cash required to settle
securities transactions on such business day, shall be transferred to the
trustee under a Trust Agreement of even date herewith between the Bank and the
Company and attached hereto as Exhibit A.
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The Bank shall make payments of cash to, or for the account of, the Company
from such cash only (i) for the purchase of securities for the Fund's portfolio
as provided in Paragraph 13 hereof; (ii) upon receipt of Written Instructions,
for the payment of interest, dividends, taxes, fees or expenses of the Fund;
(iii) upon receipt of Written instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and held by or to be delivered to the Bank; (iv) to a sub-custodian
pursuant to Paragraph 7 hereof; (v) for the redemption of Shares; (vi) for
payment of the amount of dividends received in respect of securities sold short
against the box; or (vii) upon receipt of Written Instructions, for other proper
Fund purposes. No payment pursuant to (i) above shall be made unless the Bank
has received a copy of the broker's or dealer's confirmation or the payee's
invoice, as appropriate.
(b) The Bank is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the account
of the Fund.
7. Receipt of Securities; Subcustodian
(a) Except as provided by Paragraph 8 hereof, the Bank shall hold and
physically segregate in a separate account, identifiable at all times from those
of any other persons, firms, or corporations, all securities and non-cash
property received by it for the account of the Fund. All such securities and
non-cash property are to be held or disposed of by the Bank for the Fund
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolution of the Company's Board of Directors
authorizing the transaction, the Bank shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments except in accordance with the express terms
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provided for in this Agreement. In no case may any director, officer, employee
or agent of the Company withdraw any securities.
(b) Where securities are transferred to an account of the Fund established
pursuant to Paragraph 8 hereof, the Bank shall also by book-entry or otherwise
identify as belonging to the Fund the quantity of securities in a fungible bulk
of securities registered in the name of the Bank (or its nominee) or shown in
the Bank's account on the books of the Book-Entry System. The Bank shall furnish
the Company with reports relating to Property held for the Fund under this
Agreement in accordance with Paragraph 17 hereof.
In connection with its duties under this Paragraph 7, the Bank may, at its
own expense, enter into sub-custodian agreements with other banks or trust
companies for the receipt of certain securities and cash to be held by the Bank
for the account of the Company pursuant to this Agreement, provided that each
such bank or trust company has an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than ten million
dollars ($10,000,000) and that such bank or trust company agrees with the Bank
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Bank shall remain responsible for the performance of
all of its duties under this Agreement and shall hold the Fund harmless from the
acts and omissions, under the standards of care applicable to the Bank under
Paragraph 23 hereof, of any bank or trust company that it might choose pursuant
to this Paragraph 7 or of the Book-Entry System.
8. Use of Book-Entry System
The Company shall deliver to the Bank certified resolutions of the Board of
Directors of the Company approving, authorizing and instructing the Bank on a
continuous and on-going basis
8
until instructed to the contrary by Oral or Written Instructions actually
received by the Bank (a) to deposit in the Book-Entry System all securities
belonging to the Funds and eligible for deposit therein and (b) to use the
Book-Entry System to the extent possible in connection with settlements of
purchases and sales of securities by the Fund, and deliveries and returns of
securities loaned, subject to repurchase agreements or used as collateral in
connection with borrowings. Without limiting the generality of such use, it is
agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Funds deposited in the Book-Entry System
will at all times be segregated from any assets and cash controlled by the Bank
in other than a fiduciary or custodian capacity but may be commingled with other
assets held in such capacities.
(b) All books and records maintained by the Bank which relate to the Funds'
participation in the Book-Entry System will at all times during the Bank's
regular business hours be open to the inspection of the Company's duly
authorized employees or agents, and the Company will be furnished with all
information in respect of the services rendered to it as it may require.
(c) The Bank will provide the Company with copies of any report obtained by
the Bank on the system of internal accounting control of the Book-Entry System
promptly after receipt of such a report by the Bank. The Bank will also provide
the Company with such reports on its own system of internal control as the
Company may reasonably request from time to time.
9. Instructions Consistent with Charter, Etc.
(a) Unless otherwise provided in this Agreement, the Bank shall act only
upon Oral and Written Instructions. Although the Bank may know of the provisions
of the Charter and
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By-Laws of the Company, the Bank may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with any
provisions of such Charter or By-Laws or any vote, resolution or proceeding or
the Company's shareholders, or of its board of directors, or of any committee
thereof.
(b) the Bank shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by the Bank pursuant to this Agreement.
The Company agrees to forward to the Bank Written Instructions confirming Oral
Instructions in such manner that the Written Instructions are received by the
Bank by the close of business of the same day that such Oral Instructions are
given to the Bank. The Company agrees that the fact that such confirming Written
Instructions are not received by the Bank shall in no way affect the validity of
the transactions or enforceability of the transactions authorized by the Company
by giving Oral Instructions. The Company agrees that the Bank shall incur no
liability to the Company in acting upon Oral Instructions given to the Bank
hereunder concerning such transactions, provided such instructions reasonably
appear to the Bank to have been received from an Authorized Person.
10. Transactions Not Requiring Instructions
In the absence of contrary Written Instructions, the Bank is authorized to
take the following actions:
(a) Collections of Income and Other Payments. The Bank shall, on
behalf of each Fund:
(i) collect and receive for the account of the Fund, all income
and other payments and distributions, including (without limitation) stock
dividends, rights, bond coupons, option premiums and similar items, included or
to be included in the Property, and promptly
10
advise the Fund of such receipt and shall credit such income, as collected, to
the Fund's custodian account;
(ii) endorse and deposit for collection, in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same day as
received;
(iii) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio securities as a result of a
stock dividend, share split-up or reorganization, recapitalization, readjustment
or other rearrangement or distribution of rights or similar securities issued
with respect to any portfolio securities belonging to the Fund held by the Bank
hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or otherwise
become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other payments and
the endorsement for collection of checks, drafts, and other negotiable
instruments as described in Paragraph 24 of this Agreement.
(b) Miscellaneous Transactions. The Bank is authorized to deliver or
cause to be delivered Property against payment or other consideration or written
receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary securities
for definitive securities; and
11
(iii) for transfer of securities into the name of the Fund or the
Bank or nominee of either, or for exchange of securities for a different number
of bonds, certificates, or other evidence, representing the same aggregate face
amount or number of units bearing the same interest rate, maturity date and call
provisions, if any; provided that, in any such case, the new securities are to
be delivered to the Bank.
11. Transactions Requiring Instructions
Upon receipt of Oral or Written Instructions and not otherwise, the Bank,
directly or through the use of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Company as owner of any securities may
be exercised;
(b) deliver any securities held for a Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for a Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of a Fund and take
such other steps as shall be stated in said Oral or Written Instructions to be
for the purpose of effectuating
12
any duly authorized plan of liquidation, reorganization, merger, consolidation
or recapitalization of the Fund;
(e) release securities belonging to a Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by such Fund; provided, however, that securities shall be released only upon
payment to the Bank of the monies to be received by the Bank in accordance with
such Oral or Written Instructions, except that in cases where additional
collateral is required to secure a borrowing already made, in which case and
subject to receipt by the Bank of "Oral or Written Instructions", further
securities may be released for that purpose; an repay such loan upon redelivery
to it of the securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
(f) release and deliver securities owned by a Fund in connection with
any repurchase agreement entered into on behalf of the Fund, but only on receipt
of payment therefor; and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
12. Segregated Accounts; Securities Lending
(a) the Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated account or accounts on its records for and
on behalf of each of the Funds, into which account or accounts may be
transferred cash and/or securities, including securities in the Book-Entry
System (i) for the purposes of compliance by the Fund with the procedures
required by a securities or option exchange, provided such procedures comply
with the 1940 Act
13
and Investment Company Act Release No. 10666 (April 18, 1979) or any subsequent
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies, and (ii) for other proper corporate
purposes, but only, in the case of clause (ii), upon receipt of Written
Instructions.
(b) The Bank hereby acknowledges that the Company may require it to
enter into one or more third-party custodial agreements regarding Funds'
purchases and sales of futures contracts and options thereon, and that any such
third-party agreement with a futures commission merchant may contain any
provisions which the Company and the futures commission merchant reasonably deem
necessary and which do not subject the Bank to higher standards of care (except
as may be required by law) than does this Agreement.
(c) The Company may, from time to time, furnish the Bank with copies
of securities loan agreements (singly "Securities Loan Agreement" and
collectively "Securities Loan Agreements"), pursuant to which the Company may
lend securities of any Fund to the respective brokerage firms named therein
(singly the "Brokerage Firm" and collectively the "Brokerage Firms").
In each such case, and until the Company shall have given the Bank Written
Instructions that such Securities Loan Agreement has terminated, the Company
authorizes the Bank, as its agent in connection with the lending of securities
from time to time upon receipt by the Bank of Oral or Written Instructions: (a)
to deliver to the Brokerage Firm named in the Securities Loan Agreement specific
securities held in the specified Fund, it being understood that in each case the
Bank will give prompt notice thereof to the Company; (b) to receive from the
Brokerage Firm a certified or bank cashier's check, in immediately available
funds, or obligations of the U. S.
14
Government in an amount equal to the then market value of the securities, as
specified in such Instructions.
The Company will evaluate on a daily basis its rights and obligations under
each Securities Loan Agreement, such as marking to market, and will demand that
additional collateral be delivered to the Bank by the Brokerage Firm under
proper advice to the Bank, or shall give Oral or Written Instructions to the
Bank to release excess collateral to the Brokerage Firm.
The Bank may, through its commercial, trust or other departments, be a
creditor for its own account, or represent in a fiduciary capacity other
creditors and/or customers, or any Brokerage Firm, even though any of such
interests may potentially be in conflict with those of the Company.
The Company represents that it has the power and authority to lend the
securities in accordance with a Securities Loan Agreement and that such lending
as provided in such Securities Loan Agreement and as provided herein, has been
duly authorized by all necessary action, has received any required regulatory
approval and will not violate any law, regulation, Charter, By-law or other
instrument, restriction or provision applicable to the Company.
With respect to acting as agent for the Company in connection with the
lending of securities to Brokerage Firms pursuant to Securities Loan Agreements,
the Bank shall have no duties or responsibilities except those expressly set
forth herein and the Company will indemnify the Bank against any liability which
it may incur in connection with such lending in accordance with Paragraph 22
hereof. The Bank shall have no responsibility in connection with the present or
future financial condition of any such Brokerage Firm or any failure on the part
of any such Brokerage Firm or any failure on the part of any such Brokerage Firm
to return any such securities for any reason whatsoever or to comply with any
provision of any Securities Loan
15
Agreement or any failure on the part of any such Brokerage Firm to comply with
any law or regulation, all such risks being assumed by the Company.
13. Dividends and Distributions
The Company shall furnish the Bank with appropriate evidence of action by
the Company's Board of Directors declaring and authorizing the payment of any
dividends and distributions. Upon receipt by the Bank of Written Instructions
with respect to dividends and distributions declared by the Company's Board of
Directors and payable to shareholders of the Fund who have elected in the proper
manner to receive their distributions or dividends in cash, and in conformance
with procedures mutually agreed upon by the Bank, the Company, and the Company's
transfer agent, the Bank shall pay to the Fund's transfer agent, as agent for
the Fund's shareholders, an amount equal to the amount indicated in said Written
Instructions as payable by the Fund to such shareholders for distribution in
cash by the transfer agent to such shareholders.
14. Purchases of Securities
Promptly after each decision to purchase securities by the Adviser, the
Company, through the Adviser, shall deliver to the Bank Written or Oral
Instructions specifying with respect to each such purchase: (a) the name of the
issuer and the title of the securities, (b) the number of shares or the
principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name of the person from whom or the
broker through whom the purchase was made. Oral Instructions shall be confirmed
by Written Instructions. The Bank shall upon receipt of securities purchased by
or for the Fund pay out of the moneys held for the account of the Fund
16
the total amount payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions in accordance with current industry
practices.
15. Sales of Securities
Promptly after each decision to sell securities by the Adviser or exercise
of an option written by the Company, the Company, through the Adviser, shall
deliver to the Bank Oral or Written Instructions, specifying with respect to
each such sale: (a) the name of the issuer and the title of the security, (b)
the number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale and settlement, (d) the sale price per unit, (e) the total
amount payable to the Fund upon such sale, and (f) the name of the broker
through whom or the person to whom the sale was made. The Bank shall deliver the
securities upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Oral Instructions in accordance with current industry practice. Subject to the
foregoing, the Bank may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
16. Records
The books and records pertaining to the Fund which are in the possession of
the Bank shall be the property of the Funds. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws and regulations. The Company, or the Company's authorized
representatives, shall have access to such books and records at all
17
times during the Bank's normal business hours. Upon the reasonable request of
the Company, copies of any such books and records shall be provided by the Bank
to the Company or authorized representative at the Company's expense.
17. Reports
(a) The Bank shall furnish the Company the following reports:
(1) such periodic and special reports as the Company may
reasonably request;
(2) a daily report detailing all transactions (cash and
securities) that have been posted to each Fund's account; such report, which
shall be in such form as may be agreed upon by the Bank and the Company from
time to time, shall be received not later than the morning of the business day
next following the day to which the report relates;
(3) statements, at such intervals as the Company may reasonably
request but not less frequently than monthly, summarizing all transactions and
entries for the account of the Funds, listing the portfolio securities belonging
to the Funds with the adjusted average cost of each issue and the market value
at the end of such month, and stating the cash account of the Fund including
disbursements;
(4) the reports to be furnished to the Company pursuant to Rule
17f-4 under the 1940 Act; and
(5) such other information as may be agreed upon from time to
time between the Company and the Bank.
(b) The Bank shall transmit promptly to the Company any proxy
statement, proxy materials, notice of a call or conversion or similar
communications received by it as Custodian of the Property.
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18. Cooperation with Accountants
The Bank shall cooperate with the Company's independent public accountants
and shall take all reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as such may be required
from time to time by the Company.
19. Confidentiality
The Bank agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
prior, present, or potential shareholders, except, after prior notification to
and approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where the Bank may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Fund.
20. Right to Receive Advice
(a) Advice of Fund. If the Bank shall be in doubt as to any action to
be taken or omitted by it, it may request, and shall receive, from the Company
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Bank shall be in doubt as to any
question of law involved in any action to be taken or omitted by the Bank, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for the Adviser, the Company or the Bank, at the option of the Bank).
19
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by the Bank pursuant to subparagraph
(a) of this Paragraph and advice received by the Bank pursuant to subparagraph
(b) of this Paragraph, the Bank shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of the Bank. The Bank shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraphs (a) or (b) of this
Paragraph which the Bank, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this Paragraph shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to the Bank's properly taking or omitting to
take such action. Nothing in this subsection shall excuse the Bank when an
action or omission on the part of the Bank constitutes willful misfeasance, bad
faith, negligence or reckless disregard by the Bank of any duties or obligations
under this Agreement.
21. Compensation
As compensation for the services rendered by the Bank during the term of
this Agreement, the Company will pay to the Bank fees in accordance with the fee
schedule agreed upon from time to time in writing by the Bank and the Company.
20
22. Indemnification
The Company, as sole owner of the Property, agrees to indemnify and hold
harmless the Bank and its nominees from all taxes, charges, expenses,
assessments, claims and liabilities and expenses, including attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which the
Bank takes or does or omits to take or do upon receipt of Oral or Written
Instructions or under this Agreement, provided, that neither the Bank nor any of
its nominees shall be indemnified against any liability to the Company or to its
shareholders (or any expenses incident to such liability) arising out of the
Bank's or such nominee's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties or responsibilities under this Agreement.
23. Responsibility of the Bank
(a) In the performance of its duties hereunder, the Bank shall be
obligated to exercise care and diligence and to act in good faith and to use its
best efforts to assure the accuracy and completeness of all services performed
under this Agreement. Except as provided in (b) below, the Bank shall be
responsible for all direct losses occasioned by the Bank's negligent failure to
perform its duties under this Agreement, including but not limited to losses
related to inaccuracies in the daily reports (upon which the Company and its
agents rely in calculating the Fund's net asset value and in determining whether
the Company and the Funds are in compliance with the 1940 Act and the
requirements of Subchapter M of the Internal Revenue Code of 1986 (as amended)
to be provided under Paragraph 17 hereof or otherwise. However, the Bank shall
not be liable for any incidental, consequential or punitive damages.
21
(b) The Bank shall assume entire responsibility for loss occasioned by
robbery, burglary, fire, theft or mysterious disappearance irrespective of
whether such losses occur while such Property is in possession of the Bank or
the possession of one of the Bank's agents, nominees, depositories,
correspondents or sub-custodians appointed pursuant to Paragraph 7 hereof or any
Book-Entry System. In the event of any such loss the Bank's liability shall be
limited to the replacement value thereof as of the date of the discovery of such
loss and the Bank, at the Company's option, shall make prompt replacement of
Property with like kind and quality or shall make prompt restitution to the Fund
for such loss. In addition, in the event of any loss of the Property due to any
other cause, unless the Bank can prove that it and its agents, nominees,
depositories and correspondents were not negligent and did not act with willful
misconduct, the Bank will be liable for such loss. Notwithstanding the
foregoing, the Bank shall not be liable for losses occurring by reason of acts
of civil or military authority, national emergencies, floods, acts of God,
insurrections, wars, riots or similar catastrophes.
(c) The Bank shall not have any duty or obligation to inquire (i) into
the validity or invalidity or authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which the Bank reasonably believes
to be genuine; (ii) the validity or invalidity of the issuance of any securities
included or to be included in the Property, the legality or illegality of the
purchase of such securities, or the propriety or impropriety of the amount paid
therefor; (iii) the legality or illegality of the sale (or exchange) of any
Property or the propriety or impropriety of the amount for which such Property
is sold (or exchanged); or (iv) whether any Property at any time delivered to or
held by the Bank may properly be held by or for the Fund.
22
24. Collections
All collections of monies or other property in respect, or which are to
become part, of the Property (but not the safekeeping thereof upon receipt by
the Bank) shall be at the sole risk of the Company, provided that the Bank
agrees to the following procedures:
(i) upon maturity of any security held by a Fund, proceeds will be
credited and available for investment by the Fund on the maturity date;
(ii) with respect to sales of securities held by a Fund and provided
the Bank receives timely and accurate notification of any such sale, sale
proceeds will be credited and available for investment by the Fund on the
settlement date for transactions settled in Federal funds, and on settlement
date plus one for transactions settled in Clearinghouse funds;
(iii) with respect to income and principal from securities held by the
Fund, where the precise amount to be received is known prior to payable date,
such moneys will be credited to the Fund on the payable date and will be made
available to the Fund for investment on such date in cases where such moneys are
to be received in Federal funds or, in cases where such moneys are to be
received in Clearinghouse funds, on the day following the payable date;
(iv) with respect to any income and principal payment on securities
held by a Fund a amount of which is unknown either by the Bank or the Adviser,
such payments will be credited to the Fund upon receipt by the Bank, it being
understood that the Bank will make every effort to collect such payments as
quickly as possible.
With respect to items referred to in (i), (ii) and (iii) above, in any case
where the Bank does not receive any payment due to the Fund within a reasonable
time after the Bank has made proper demands for the same, it shall so notify the
Company in writing, including copies of all
23
demand letters, any written responses thereto, and memoranda of all oral
responses thereto and to telephonic demands, and shall thereafter have the right
to reverse the credit previously posted to the Fund with respect to such item.
The Bank shall not be obliged to take legal action for collection of any unpaid
item unless and until reasonably indemnified to its satisfaction.
25. Duration and Termination
This Agreement shall continue until termination by the Company on 60 days
written notice or by the Bank on 120 days' written notice. In the event of such
notice of termination, the Company's Board of Directors shall, by resolution
duly adopted, promptly appoint a Successor Custodian to serve upon the terms set
forth in this Agreement. Upon termination hereof the Company shall pay to the
Bank such compensation as may be due as of the date of such termination and
shall likewise reimburse the Bank for its reasonable costs, expenses and
disbursements incurred prior to such termination. The Bank shall have no lien,
right of set-off, or claim of any kind whatsoever against any Property of the
Funds (including records relating to the Fund maintained by the Bank) in the
possession of the Bank.
If a Successor Custodian is appointed by the Directors, the Bank shall,
upon termination, deliver to such Successor Custodian the records of the Bank
with respect to the Funds, and duly endorsed and in form for transfer, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank under this Agreement.
In the event that no such Successor Custodian is appointed within 90 days
after the date of such notice of termination by the Bank, the Company will
promptly submit to the shareholders of each of the Funds the question whether
they wish to terminate the Fund or to function without a bank custodian, and the
Bank shall deliver the funds and property of the Funds to the Company
24
only pursuant to a certified copy of a resolution of the Company's Board of
Directors, signed by a majority of the Board of Directors of the Fund in the
exercise of such power conferred upon the Fund by its shareholders, such
delivery to be made in accordance with such resolution.
In the event that the Bank is not notified of the appointment of a
Successor Custodian on or before the date of the termination of this Agreement,
the Bank shall have the right to deliver to a bank or trust company of its own
selection (a) with significant experience in serving as a custodian for
registered investment companies; and (b) having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less than
$10,000,000, all securities, records, and other properties then held by the Bank
to be held by such bank or trust company provided that such bank or trust
company agrees to serve as custodian for such securities, records and other
properties substantially in accordance with the term hereof and in accordance
with its customary fee schedule for such services.
In the event that securities, funds, and other properties remain in the
possession of the Bank after the date of termination hereof owing to failure of
the Board of Directors to appoint a Successor Custodian, the Bank shall be
entitled to fair compensation for its services during such period and the
provisions of this Agreement relating to the duties and obligations of the Bank
shall remain in full force and effect. If any Property remains in the custody of
the Bank pursuant to the preceding sentence for more than six months, the Bank
shall be entitled to receive a premium of one and one-half percent over the fees
to which it would otherwise be entitled for its services for each succeeding
month during which the Bank remains in possession of such property.
25
26. Notices
All notices and other communications (collectively referred to as "Notice"
or "Notices" in this Paragraph) under this Agreement (other than Written or Oral
Instructions as defined in this Agreement and as referred to in Paragraph 9 (b))
must be in writing and will be deemed to have been duly given or delivered when
delivered by hand (including by Federal Express or similar express courier) or
three days after being mailed by prepaid registered or certified mail, return
receipt requested: (a) if to the Bank at the Bank's address, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, marked for the attention of Xxxxx Xxxxx,
Trust Officer (or her successor); (b) if to the Company, at the address of the
Fund, 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000-0000, marked for the attention
of the Fund's Treasurer; or (c) to such other address as shall have been last
designated by Notice in accordance with this on Paragraph 26. All postage,
cable, telegram, telex and facsimile sending device charges arising from the
sending of a Notice hereunder shall be paid by the sender.
27. Further Actions
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
28. Amendments
This Agreement or any part hereof may be changed or waived only by an
instrument in writing signed by the party against which enforcement of such
change or waiver is sought.
26
29. Counterparts
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
30. Miscellaneous
This Agreement embodies the entire agreement and understanding between the
parties hereto, and supersedes all prior agreements and understandings relating
to the subject matter hereof, provided that the parties hereto may embody in one
or more separate documents their agreement, if any, with respect to delegated
and/or Oral Instructions. The captions 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. This
Agreement shall be deemed to be a contract made in Pennsylvania and governed by
Pennsylvania law. If any provision of this Agreement shall be held or made
invalid by a court decision, statue, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding and
shall inure to the benefit of the parties hereto and their respective
successors.
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on this 26th day of August, 1996.
[SEAL] MELLON BANK, N. A.
Attest: /s/ Xxxxx Xxxxx By /s/ Xxxxx Xxxxx
-------------------- -------------------
[SEAL] AETNA VARIABLE PORTFOLIOS, INC.
Attest: By /s/ Xxxxxxxxx X. Xxxxxx
-------------------- -----------------------
28
EXHIBIT A
TRUST AGREEMENT
THIS TRUST AGREEMENT is made between AETNA VARIABLE PORTFOLIOS, INC., a
Maryland corporation (the "Fund") as Settlor, and MELLON BANK, N. A., a national
banking association (the "Bank") as Trustee.
I. Background: The background of this Agreement is as follows:
A. The Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as
amended, and [currently issues four classes of shares,] each of
which represents a separate investment portfolio;
B. The Fund has retained the Bank to serve as the Fund's custodian
under a Custodian Agreement of even date herewith ("Custodian
Agreement") for its Portfolios as follows: Aetna Variable Index
Plus Portfolio, Aetna Variable Small Company Portfolio, Aetna
Variable Growth Portfolio, Aetna Variable Capital Appreciation
Portfolio and for such additional portfolios as may from time to
time be offered by the Fund on the terms set forth herein (each,
a "Portfolio"), and the Bank is willing to serve as such; and
C. The Fund intends to transfer to the Bank to hold as trustee under
this Agreement all the income and principal cash balances which
are transferred to it in accordance with Paragraph 6(a) of the
Custodian Agreement (the Bank in such capacity is hereinafter
referred to as the "Trustee"), and hereby directs the Trustee to
hold such cash balances in accordance with the following terms.
II. Dispositive Terms: The Trustee shall invest and manage the income and
principal cash balances of each Portfolio in accordance with the
provisions of Article III hereof. Distributions to or from the trust
shall be as directed from time to time by the Fund.
III. Management Provisions: The Trustee shall invest as it deems
appropriate in any one or more money market demand accounts of the
Bank or of any other bank, provided the accounts are fully insured by
the FDIC and any excess above the insurance limit is collateralized by
securities in accordance with Regulation 9.10(b) of the Comptroller of
the Currency, 12 CFR 9.10 (b).
IV. Accounting: The Trustee will send the Fund statements at least monthly
showing the transactions in the trust. The Fund must report any errors
to the Trustee, including the non-receipt of a statement, within 90
days after the Fund normally receives a statement. Otherwise, the
Fund, at the Trustee's discretion, may be deemed to have accepted the
transactions as stated.
V. Provisions Regarding the Trustee:
A. The "Authorized Person" to act for the Fund and the methods of
properly acting for the Fund under this Agreement shall be the
same as specified in the Custodian Agreement, as that may be
amended from time to time;
B. The fact that the Bank is Trustee and in such capacity deposits
trust assets in banking accounts of the Bank shall no be deemed a
conflict of interest. The Bank may receive its usual charges or
profits for that service; and
C. The Trustee may resign upon 120 days' notice to the Fund; Settlor
may terminate this Agreement at any time. Immediately upon
termination the Trustee shall pay all trust assets held hereunder
to the Successor Custodian or the Fund in accordance with
Paragraph 25 of the Custodian Agreement.
VI. Situs and Governing Law: The situs of this Trust shall be in
Pennsylvania, and all questions as to the construction, validity,
effect or administration of this trust shall be governed by
Pennsylvania law.
VII. Rights Reserved: The Fund reserves the right to revoke this trust by
writing delivered to the Trustee and to amend this trust with the
Trustee's approval.
Signed August 21, 1996
ATTEST: AETNA VARIABLE PORTFOLIOS, INC.
By: /s/Xxxxxxxxx X. Xxxxxx
------------------------------------ ----------------------------------
The foregoing trust was delivered, and is hereby accepted in Pennsylvania on
August 26, 1996.
ATTEST: MELLON BANK, N.A.
/s/ Xxxxx Xxxxx By: /s/ Xxxxx Xxxxx
------------------------------------ ----------------------------------
2
