INVESTMENT SUBADVISORY AGREEMENT
Between
Aetna Life Insurance and Annuity Company
and
Xxxxxxx, Xxxxxxx & Xxxxx, 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 Xxxxxxx, Xxxxxxx & Xxxxx, Inc. ("Subadviser"), a corporation organized and
existing under the laws of the State of Delaware .
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the _____ 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 Xxxxxxx International Growth 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.
The Adviser and the Company understand that the Subadviser has entered into
an agreement with Zurich Insurance Group ("Zurich") under which Zurich will
acquire a majority interest in the Portfolio Manager and Zurich Xxxxxx
Investments, Inc. (an investment management company and a subsidiary of Zurich)
will become part of the Subadviser. The Subadviser's name will be changed to
Xxxxxxx Xxxxxx Investments, Inc. ("SKI"). The Subadviser's current
employee-shareholders will retain a significant minority ownership interest in
SKI. Under the Advisers Act, the transaction will constitute an "assignment" of
this contract. By signing below, notwithstanding anything in this Agreement to
the contrary, the Adviser consents to the assignment and agrees that SKI and/or
its subsidiaries may continue to provide the services described herein to the
Adviser and the Company following the closing. The Subadviser agrees to pay
costs associated with any amendments to the Company's Registration Statement and
mailings to Company shareholders necessitated by this assignment.
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 the Subadviser or its
affiliate 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.
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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, including attendance at Board meetings, as reasonably
requested, to present such information and reports to the Board;
(ii) consult with the Company's pricing agent regarding the valuation of
securities that are not registered for public sale, not traded on
any securities markets, or otherwise may be deemed illiquid for
purposes of the 1940 Act and for which market quotations are not
readily available;
(iii) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have
investment objectives, policies, and strategies substantially
similar to those employed by the Subadviser in managing the
Portfolio which may be reasonably necessary, under applicable laws,
to allow the Company or its agent to present historical performance
information concerning the Subadviser's similarly managed accounts,
for inclusion in the Company's Prospectus and any other reports and
materials prepared by the Company or its agent, in accordance with
regulatory requirements;
(iv) establish appropriate personal contacts with the Adviser and the
Company's Administrator in order to provide the Adviser and
Administrator with information as reasonably requested by the
Adviser or Administrator; and
(v) execute account documentation, agreements, contracts and other
documents as the Adviser shall be requested by brokers, dealers,
counterparties and other persons to execute in connection with its
management of the assets of the 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. Adviser and Company Undertakings. To facilitate the Subadviser's
fulfillment of its obligations under this Agreement, the Adviser and the
Company will undertake the following:
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(i) the Adviser agrees promptly to provide the Subadviser with all
amendments or supplements to the Prospectus, the Company's Articles
of Incorporation, and By-Laws;
(ii) the Company and the Adviser each agrees, on an ongoing basis, to
notify the Subadviser expressly in writing of each change in the
fundamental and nonfundamental investment policies of the Portfolio;
(iii) the Adviser agrees to provide or cause to be provided to the
Subadviser with such assistance as may be reasonably requested by
the Subadviser in connection with its activities pertaining to the
Portfolio under this Agreement, including, without limitation,
information concerning the Portfolio, its available funds, or funds
that may reasonably become available for investment, and information
as to the general condition of the Portfolio's affairs;
(iv) the Adviser agrees to provide or cause to be provided to the
Subadviser on an ongoing basis, such information as is reasonably
requested by the Subadviser for performance by the Subadviser of its
obligations under this Agreement, and the Subadviser shall not be in
breach of any term of this Agreement or be deemed to have acted
negligently if the Adviser fails to provide or cause to be provided
such requested information and the Subadviser relies on the
information most recently furnished to the Subadviser; and
(v) the Adviser will promptly provide the Subadviser with any guidelines
and procedures applicable to the Subadviser or the Portfolio adopted
from time to time by the Board and agrees to promptly provide the
Subadviser copies of all amendments thereto.
D. 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.
E. 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 most favorable price and
best execution available, considering all of the circumstances, and shall
maintain such records as are required of an investment adviser under
applicable law.
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Subject to the appropriate policies and procedures approved by the Adviser
and the Board, the Subadviser may, to the extent authorized by Section 28(e)
of the Securities Exchange Act of 1934, cause the Portfolio to pay a broker
or dealer that provides brokerage or research services to the Subadviser, an
amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if the Subadviser determines, in good faith, that
such amount of commission is reasonable in relationship to the value of such
brokerage or research services provided viewed in terms of that particular
transaction or the Subadviser's overall responsibilities to the Portfolio or
its other advisory clients. To the extent authorized by said Section 28(e)
and the Adviser and the Board, the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of such action. In addition, subject to seeking
the best execution available, the Subadviser may also consider sales of
shares of the Portfolio as a factor in the selection of brokers and dealers.
F. 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 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.
G. 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.
H. 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.
I. 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
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or information that the Subadviser may reasonably request to enable it to
perform its duties pursuant to this Agreement.
J. 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. Upon termination of this Agreement, the Adviser and the Company
shall immediately cease to use such name and trademarks, except as necessary
to comply with disclosure requirements under the federal securities laws.
During the term of this Agreement, the Adviser shall furnish to the
Subadviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of the Company or the public, which refer to the
Subadviser or its clients in any way, prior to the use thereof, and the
Adviser shall not use any such materials if the Subadviser reasonably objects
within five business days (or such other time as may be mutually agreed)
after receipt thereof. The Adviser shall ensure that materials prepared by
employees or agents of the Adviser or its affiliates that refer to the
Subadviser or its clients in any way are consistent with those materials
previously approved by the Subadviser. 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 business 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 or the Company for
any loss or expense suffered by the Adviser or the Company resulting from its
acts or omissions as Subadviser to the Portfolio, except for losses or expenses
to the Adviser or the Company resulting from willful misconduct, bad faith, or
gross negligence in the performance of, or from reckless disregard of, the
Subadviser's duties under this Agreement. Neither the Subadviser nor any of its
agents shall be liable to the Adviser or the Company for any loss or expense
suffered as a consequence of any action or inaction of other service providers
to the Company in failing to observe the instructions of the Adviser, provided
such action or inaction of such other service providers to the Company is not a
result of the willful misconduct, bad faith or gross negligence in the
performance of, or from reckless disregard of, the duties of the Subadviser
under this Agreement.
5. Non-Exclusivity. The services of the Subadviser to the 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
6
corporation, including other investment companies. Furthermore, the Company and
the Adviser recognize that the Subadviser may give advice, and take action, with
respect to its other clients that may differ from the advice given, or the time
or nature of action taken, with respect to the Portfolio.
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 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 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
7
in order to perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify the Adviser of the occurrence of
any event that would disqualify the Subadviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise.
B. The Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already done
so, will provide the Adviser and the Company with a copy of such code of
ethics, together with evidence of its adoption.
C. The Subadviser has provided the Adviser and the Company with a copy of its
Form ADV as most recently filed with the SEC and will, promptly after filing
any amendment to its Form ADV with the SEC, furnish a copy of such amendment
to the Adviser.
10. Provision of Certain Information by Subadviser. The Subadviser will promptly
notify the Adviser in writing of the occurrence of any of the following events:
A. the Subadviser fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Subadviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Subadviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry, or investigation, at law or in equity, before or by any
court, public board, or body, involving the affairs of the Company;
C. a controlling stockholder of the Subadviser or the portfolio manager of
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
8
the Subadviser. This Agreement may also be terminated by the Adviser: (i) on at
least 60 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 60 days' prior notice to the Adviser. This Agreement shall
terminate automatically in the event of its assignment or upon termination of
the Advisory Agreement between the Company and the Adviser.
13. Amendment of Agreement. No provision of this Agreement may be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge,
or termination is sought, and no material amendment of this Agreement shall be
effective until approved by vote of a majority of the Independent Directors cast
in person at a meeting called for the purpose of such approval.
14. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Maryland without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent that the applicable laws
of the State of Maryland conflict with the applicable provisions of the 1940
Act, the latter shall control.
B. Captions. The Captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
C. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties concerning management of the 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
9
assets," "sale," "sell," and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemptions as may be granted by
the SEC by any rule, release or order. Where the effect of a requirement of
the federal securities laws reflected in any provision of this Agreement is
made less restrictive by a rule, release, or order of the SEC, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, release, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Aetna Life Insurance and Annuity Company
Attest: By:_____________________________________
___________________________________
Xxxxxxx, Xxxxxxx & Xxxxx, Inc.
By:_____________________________________
Attest:
___________________________________
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Appendix A
Fee Schedule
Xxxxxxx International Growth .75% on the first $20 million of
average daily net assets
.65% on the next $15 million
.50% on the next $65 million
.40% on the next $200 million
.30% on assets over $300 million
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