SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section
240.14a-12
PORTFOLIO PARTNERS, INC.
(Name of Registrant/s as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- ------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ------------------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------------------
(4) Date Filed:
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
(A SERIES OF PORTFOLIO PARTNERS, INC.)
151 FARMINGTON AVENUE
HARTFORD, CONNECTICUT 06156-8962
TO THE SHAREHOLDERS OF:
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Dear Shareholder:
The attached Proxy Statement from Portfolio Partners, Inc. (the "Fund")
discusses a proposal that is being submitted to shareholders of the Scudder
International Growth Portfolio (the "Scudder Portfolio"). A Shareholder
Meeting has been called for November 20, 1998, to consider the proposal. As a
shareholder in the Scudder Portfolio, we ask you to review the Proxy Statement
and cast your vote on the proposal. The Board of Directors of the Fund has
recommended that shareholders approve the proposal.
The proposal affecting the Scudder Portfolio seeks approval of an
investment sub-advisory agreement between Aetna Life Insurance and Annuity
Company (the "Advisor") and Scudder Kemper Investments, Inc. with respect to
the assets of the Scudder Portfolio. The proposal is discussed in greater
detail in the attached Proxy Statement. We encourage you to review the Proxy
Statement and cast your vote at your earliest convenience.
Your vote is important. You do not need to be physically present at
the meeting, but you should complete and sign the enclosed voting instruction/
proxy card and return it promptly in the enclosed envelope. Every vote counts.
We urge you to complete and return your proxy card as soon as possible to avoid
adjournment of the Shareholder Meeting.
We look forward to receiving your votes in favor of the proposal.
Thank you for your support.
Sincerely,
/s/ Laurie M. LeBlanc
Laurie M. LeBlanc
President
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
(a series of Portfolio Partners, Inc.)
151 Farmington Avenue
Hartford, Connecticut 06156
NOTICE OF SPECIAL MEETING
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Scudder International Growth Portfolio, a series of Portfolio
Partners, Inc. (the "Fund"), will be held on November 20, 1998, at 10:00 a.m.,
Eastern Time, at the offices of the Fund, 151 Farmington Avenue, Hartford,
Connecticut. At the Meeting, Shareholders will be asked to consider and vote
upon the following proposal:
TO APPROVE OR DISAPPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT, DATED AS OF
SEPTEMBER 8, 1998, BETWEEN AETNA LIFE INSURANCE AND ANNUITY COMPANY (THE
"ADVISOR") AND SCUDDER KEMPER INVESTMENTS, INC. ("SCUDDER KEMPER"). UNDER THE
NEW INVESTMENT SUB-ADVISORY AGREEMENT SCUDDER KEMPER WILL CONTINUE TO ACT AS
SUB-ADVISOR (THE "SUB-ADVISOR") WITH RESPECT TO THE ASSETS OF THE SCUDDER
INTERNATIONAL GROWTH PORTFOLIO (THE "SCUDDER PORTFOLIO") OF THE FUND. THE NEW
INVESTMENT SUB-ADVISORY AGREEMENT WILL BE EFFECTIVE UPON THE CONSUMMATION OF A
MERGER TRANSACTION PURSUANT TO WHICH SCUDDER KEMPER WILL BE SUBJECT TO A CHANGE
IN CONTROL, AS DESCRIBED IN THE ATTACHED PROXY STATEMENT.
Shareholders of record at the close of business on September 8, 1998, are
entitled to notice of, and to vote at, the Meeting. Your attention is called
to the accompanying Proxy Statement. Regardless of whether you plan to attend
the Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD
so that your proportionate interest in the Fund may be voted in accordance with
your instructions. If you are present at the Meeting, you may change your
vote, if desired, at that time.
By Order of the Board of Directors of the Fund.
Susan C. Mosher
Secretary
Hartford, Connecticut
September 30, 1998
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
(a series of Portfolio Partners, Inc.)
151 Farmington Avenue
Hartford, Connecticut 06156
PROXY STATEMENT
This Proxy Statement is furnished by Portfolio Partners, Inc. (the "Fund")
to its Scudder International Growth Portfolio shareholders ("Scudder Portfolio
Shareholders"), on behalf of the Fund's Board of Directors. This Proxy
Statement is being provided to you in connection with the Fund's solicitation
of the accompanying proxy, to be voted at a Special Meeting of Shareholders
(the "Meeting") of the Scudder International Growth Portfolio (the "Scudder
Portfolio") to be held on November 20, 1998, at 10:00 a.m., Eastern Time, at
the offices of the Fund, 151 Farmington Avenue, Hartford, Connecticut, for the
purpose set forth below and in the accompanying Notice of Special Meeting.
This Proxy Statement is being mailed to Scudder Portfolio Shareholders on or
about October 13, 1998.
At the Meeting, Scudder Portfolio Shareholders will be asked to consider
and vote upon the following proposal:
TO APPROVE OR DISAPPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT, DATED AS
OF SEPTEMBER 8, 1998, BETWEEN AETNA LIFE INSURANCE AND ANNUITY COMPANY (THE
"ADVISOR") AND SCUDDER KEMPER INVESTMENTS, INC. ("SCUDDER KEMPER"). UNDER THE
NEW INVESTMENT SUB-ADVISORY AGREEMENT SCUDDER KEMPER WILL CONTINUE TO ACT AS
SUB-ADVISOR (THE "SUB-ADVISOR") WITH RESPECT TO THE ASSETS OF THE SCUDDER
PORTFOLIO. THE NEW INVESTMENT SUB-ADVISORY AGREEMENT WILL BE EFFECTIVE UPON THE
CONSUMMATION OF A MERGER TRANSACTION PURSUANT TO WHICH SCUDDER KEMPER WILL BE
SUBJECT TO A CHANGE IN CONTROL, AS DESCRIBED IN THIS PROXY STATEMENT.
CERTAIN VOTING MATTERS
Only Shareholders of record at the close of business on September 8, 1998,
(the "Record Date"), will be entitled to vote at the Meeting. As of the Record
Date there were 27,021,146.753 shares of the Scudder Portfolio outstanding.
Each share of the Scudder Portfolio is entitled to one vote and each fractional
share is entitled to a proportionate share of one vote.
The persons named in the accompanying proxy will vote as directed by the
proxy, but in the absence of voting directions, any proxy that is signed and
returned will be voted FOR the proposal. With respect to any other matters
(none of which are now known to the Fund's Board of Directors) that may be
presented at the Meeting, all proxies will be voted in the discretion of the
persons appointed as proxies.
A Shareholder may revoke the accompanying proxy at any time prior to its
use by filing with the Secretary of the Fund a written revocation or a duly
executed proxy bearing a later date. The proxy will not be voted if the
Shareholder is present at the Meeting and elects to vote in person. Attendance
at the Meeting will not, by itself, serve to revoke the proxy.
If a Shareholder abstains, the shares represented will be counted as
present and entitled to vote on the matter for purposes of determining a quorum
at the Meeting, but the abstention will have the effect of a negative vote on
the proposal.
The principal solicitation of proxies will be by mail, but proxies may also
be solicited by telephone, telegraph and personal contact by Directors,
officers and agents or regular employees of the Fund. All costs associated with
the preparation, filing and distribution of this Proxy Statement, the
solicitation and the Meeting will be borne by Scudder Kemper or its affiliates
and not the Advisor, the Fund, or the Scudder Portfolio.
NEW INVESTMENT SUB-ADVISORY AGREEMENT
BACKGROUND
The Scudder Portfolio is a separate series of the Fund, an open-end
management investment company organized as a Maryland corporation. The
Advisor, whose business address is 151 Farmington Avenue, Hartford,
Connecticut, serves as the Fund's investment advisor. The Advisor has engaged a
number of fund advisors (i.e., sub-advisors) to manage the separate portfolios
of the Fund. Scudder Kemper, under an investment sub-advisory agreement dated
February 11, 1998, (the "Current Investment Agreement") presently serves as
investment sub-advisor to the Scudder Portfolio.
On December 22, 1997, Zurich Insurance Company ("Zurich") entered into a
Merger Agreement with B.A.T Industries p.l.c. ("B.A.T"), pursuant to which
B.A.T's financial services business will be combined with Zurich's financial
services businesses (the "Merger Transaction"). When the Merger Transaction is
completed, Zurich Financial Services, a new holding company, will hold directly
or indirectly all of the B.A.T and Zurich financial services businesses,
including Zurich's majority interest in Scudder Kemper. For a more detailed
description of the Merger Transaction, please see "Information Concerning the
Merger Transaction" below.
As required by the Investment Company Act of 1940, as amended ("1940 Act"),
the Current Investment Sub-Advisory Agreement provides for its automatic
termination upon its "assignment." The 1940 Act defines "assignment" to
include any direct or indirect transfer of a controlling block of the
assignor's outstanding voting securities by a security holder of the assignor.
2
When the Merger Transaction is consummated, it will give rise to an
"assignment" of the Current Investment Sub-Advisory Agreement and thus its
termination.
When the Merger Transaction is consummated and the Current Investment
Sub-Advisory Agreement is terminated as a result, the Advisor and Scudder
Kemper intend to enter into a new investment sub-advisory agreement (the "New
Investment Sub-Advisory Agreement"). The New Investment Sub-Advisory Agreement
will contain terms that are identical to the Current Investment Sub-Advisory
Agreement, except for the execution date.
At a meeting held on September 2, 1998, the Board of Directors of the Fund
voted to approve the continuation of Scudder Kemper as Sub-Advisor to the
Scudder Portfolio subsequent to the Merger Transaction and approved the New
Investment Sub-Advisory Agreement. The Scudder Portfolio's Shareholders are
being asked to approve the New Investment Sub-Advisory Agreement at this time.
CURRENT INVESTMENT SUB-ADVISORY AGREEMENT
The Current Investment Sub-Advisory Agreement, dated February 11, 1998, was
initially approved by the Fund's Directors, including the Directors who were
not "interested persons," on August 11, 1997. For the period November 28,
1997 (commencement of operations) to December 31, 1997, the Advisor paid
Scudder Kemper $150,126 on behalf of the Scudder Portfolio for its investment
management services under the Current Investment Sub-Advisory Agreement.
INFORMATION CONCERNING SCUDDER KEMPER
Scudder Kemper, headquartered at 345 Park Avenue, New York, New York 10154,
is a Delaware corporation registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. Scudder Kemper is one of the
largest investment management organizations worldwide, managing in excess of
$200 billion of assets globally for mutual fund investors, retirement and
pension plans, institutional and corporate clients, insurance companies and
private family and individual accounts. It is also one of the largest mutual
fund managers in the United States. Zurich, through its subsidiaries, owns
approximately 70% of the outstanding voting securities of Scudder Kemper. The
remaining approximately 30% of the outstanding voting securities of Scudder
Kemper is owned by officers and employees of Scudder Kemper.
The names, addresses and principal occupations of the Directors of Scudder
Kemper are as follows: LYNN S. BIRDSONG, 345 Park Avenue, New York, New York,
Managing Director and Corporate Vice President of Scudder Kemper; LAURENCE
CHENG, Mythenquai 2, Zurich, Switzerland, formerly an executive officer of
Zurich; ROLF HUEPPI, Mythenquai 2, Zurich, Switzerland, Chairman of the Board
and Chief Executive Officer of Zurich; MARKUS ROHRBASSER, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer of Zurich; CORNELIA M. SMALL, 345 Park
Avenue, New York, New York, Managing Director and Corporate Vice President of
3
Scudder Kemper; and EDMOND D. VILLANI, 345 Park Avenue, New York, New York,
Managing Director, President and Chief Executive Officer of Scudder Kemper.
SCUDDER PORTFOLIO MANAGEMENT
The Scudder Portfolio is managed by a team of Scudder Kemper professionals,
each of whom plays an important role. Co-lead Portfolio Managers, Irene T.
Cheng and Carol L. Franklin, joined Scudder Kemper in 1993 and 1981,
respectively. Ms. Franklin has eighteen years of experience and Ms. Cheng has
twelve years of experience in finance and investing. Nicholas Bratt, portfolio
manager and Director of Scudder Kemper's Global Equity Group, directs Scudder
Kemper's overall global equity investment strategies and has been with Scudder
Kemper since 1976. Sheridan Reilly joined Scudder Kemper in 1995 as an
international portfolio manager with an active role in institutional and mutual
fund portfolio management. Mr. Reilly has over ten years of industry
experience focusing on strategies for global portfolios, currency hedging, and
foreign equity markets. Deborah Chaplin joined Scudder Kemper in 1996 and was
a portfolio manager with the Growth & Income investment team before joining
the International Investment Team as a co-manager of institutional portfolios.
Stephen Dexter joined Scudder Kemper as an equity analyst in 1986 and spent
several years in Scudder Kemper's London office where he specialized in
international investments. Returning to the U.S. in 1994, he continued as a
member of Scudder Kemper's international portfolio management team. Joan
Gregory, portfolio manager, focuses on stock selection, a role she has played
since she joined Scudder Kemper in 1992. Ms. Gregory, who joined the team in
1994, has been involved with investment in global and international stocks.
Please refer to Exhibit B to this Proxy Statement, which identifies all
investment companies which have investment objectives similar to those of the
Scudder Portfolio and for which Scudder Kemper acts as investment sub-advisor
or advisor. Exhibit B also discloses the fees charged such investment
companies by Scudder Kemper and the size of each such investment company.
INFORMATION CONCERNING THE MERGER TRANSACTION
On December 22, 1997, Zurich and B.A.T entered into a definitive
agreement (the "Merger Agreement") pursuant to which businesses of Zurich
(including Zurich's almost 70% ownership interest in Scudder Kemper) were to be
combined with the financial services businesses of B.A.T. On October 12, 1997,
Zurich and B.A.T had confirmed that they were engaged in discussions concerning
a possible business combination; shortly thereafter, Zurich and B.A.T entered
into an Agreement in Principle, dated as of October 15, 1997 (the "Agreement in
Principle"), with respect to a Zurich-B.A.T combination. The Merger Agreement
superseded the Agreement in Principle. On October 16, 1997, Zurich and B.A.T
announced that the Agreement in Principle had been reached to merge B.A.T's
financial services businesses with Zurich's businesses.
4
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services
business from its tobacco-related businesses by spinning off to its
shareholders a new British company, Allied Zurich p.l.c., which held B.A.T's
financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied
Zurich p.l.c. contributed the B.A.T financial services businesses, to a jointly
owned company, Zurich Financial Services. These transactions were completed on
September 7, 1998. As a result, upon the completion of the Merger
Transaction, the former Zurich shareholders initially became the owners
(through Zurich Allied AG) of 57% of the voting stock of Zurich Financial
Services, and former B.A.T shareholders initially became the owners (through
Allied Zurich p.l.c.) of 43% of the voting stock of Zurich Financial Services.
Zurich Financial Services now owns Zurich and the financial services businesses
previously owned by B.A.T.
Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
[Flow chart illustrating that former Zurich shareholders became the owners,
through Zurich Allied AG, a Swiss listed holding company, of 57% of the voting
stock of Zurich Financial Services, and former B.A.T shareholders initially
became the owners, through Allied Zurich p.l.c., a U.K. listed holding company,
of 43% of the voting stock of Zurich Financial Services. The flow chart shows
Zurich Financial Services owning Allied Zurich Holdings and its subsidiaries,
Farmers Group, Inc. and its subsidiaries and Zurich Insurance and its
subsidiaries, including a 70% interest in Scudder Kemper Investments.]
At the closing of the Zurich-B.A.T Transaction, the parties entered into a
Governing Agreement that establishes the corporate governance structure for
Zurich Allied AG, Allied Zurich p.l.c. and Zurich Financial Services.
The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Hueppi, Zurich's current Chairman and Chief Executive Officer, became
Chairman and Chief Executive Officer of Zurich Financial Services. As
Chairman, Mr. Hueppi will have a tie-breaking vote on all matters except
recommendations of the Audit Committee, recommendations of the Remuneration
Committee in respect of the remuneration of the Chairman and CEO, appointment
and removal of the Chairman and CEO, appointments to the Nominations, Audit and
Remuneration Committees and nominations to the Board of Directors not made
through the Nominations Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the eleven
initial members of the Group Management
5
Board, eight are current members of the Corporate Executive Board of Zurich
(including Mr. Edmond Villani, CEO of Scudder Kemper, who is responsible for
Global Asset Management for Zurich Financial Services), and three are current
B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of eleven
members, eight of whom are current Zurich directors and three of whom were
proposed by B.A.T. The Board of Directors of Allied Zurich p.l.c. also
initially consists of eleven members, eight of whom are current B.A.T directors
and three of whom were proposed by Zurich. The parties have agreed that, as
soon as possible, the Boards of Directors of Zurich Financial Services, Zurich
Allied AG and Allied Zurich p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Merger Transaction, are owned by Zurich Financial Services, include: the
Farmers Group of Insurance companies; the Eagle Star Insurance business,
primarily in the U.K.; Allied-Dunbar, one of the leading U.K. unit-linked life
insurance and pensions companies; and Threadneedle Asset Management, which was
formed initially to manage the investment assets of Eagle Star and Allied-
Dunbar, and which, at December 31, 1997, had $58.8 billion under management.
Overall, at year end 1997, the financial services businesses of B.A.T had $79
billion in assets under management, including $18 billion in third party
assets.
Zurich has informed Scudder Kemper that the financial services businesses
of B.A.T do not include any of B.A.T's tobacco businesses and that, after
careful review, Zurich has concluded that the tobacco-related liabilities
connected with B.A.T's tobacco business should not adversely affect Zurich or
the present Zurich subsidiaries, including Scudder Kemper.
NEW INVESTMENT SUB-ADVISORY AGREEMENT
Under the New Investment Sub-Advisory Agreement, Scudder Kemper manages the
investment and reinvestment of the assets of the Scudder Portfolio, subject to
and in accordance with the investment objectives, policies and restrictions of
the Scudder Portfolio and any directions which the Advisor or the Fund's Board
of Directors may give from time to time with respect to the Scudder Portfolio.
In this regard, Scudder Kemper makes all determinations with respect to the
investment of the Scudder Portfolio's assets and the purchase and sale of
portfolio securities. Scudder Kemper renders regular reports to the Fund's
Board of Directors and to the Advisor.
6
The New Investment Sub-Advisory Agreement states that Scudder Kemper will
select brokers and dealers to effect all Scudder Portfolio transactions subject
to certain conditions. Scudder Kemper will place all necessary orders with
brokers, dealers, or issuers, and will negotiate brokerage commissions if
applicable. Scudder Kemper is directed at all times to seek to execute
brokerage transactions for the Scudder Portfolio in accordance with such
policies or practices as may be established by the Board and the Advisor and
described in the current Prospectus as amended from time to time. In placing
orders for the purchase or sale of investments for the Scudder Portfolio, in
the name of the Scudder Portfolio or its nominees, Scudder Kemper shall use its
best efforts to obtain for the Scudder Portfolio the most favorable price and
best execution available, considering all of the circumstances, and will
maintain such records as are required of an investment adviser under applicable
law.
The New Investment Sub-Advisory Agreement states that Scudder Kemper,
subject to the appropriate policies and procedures approved by the Advisor and
the Board, may, to the extent authorized by Section 28(e) of the Securities
Exchange Act of 1934, cause the Scudder Portfolio to pay a broker or dealer
that provides brokerage or research services to Scudder Kemper 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 Scudder Kemper determines, in good faith, that such amount or
commission is reasonable in relation to the value of such brokerage or research
services provided.
The New Investment Sub-Advisory Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors or
by a vote of a majority of the outstanding voting securities of the Scudder
Portfolio on 60 days' prior written notice to Scudder Kemper. The New
Investment Sub-Advisory Agreement may also be terminated by the Advisor: (i) on
at least 60 days' prior written notice to Scudder Kemper, without the payment
of any penalty; (ii) upon material breach by Scudder Kemper 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 Scudder Kemper
becomes unable to discharge its duties and obligations under the New Investment
Sub-Advisory Agreement. Scudder Kemper may terminate the New Investment
Sub-Advisory Agreement at any time, without the payment of any penalty, on at
least 60 days' prior notice to the Advisor. The New Investment Sub-Advisory
Agreement shall terminate automatically in the event of its assignment or upon
termination of the Advisory Agreement between the Fund and the Advisor.
The New Investment Sub-Advisory Agreement provides that neither Scudder
Kemper nor any of its agents shall be liable to the Advisor or the Fund for any
loss or expense suffered as a consequence of any action or inaction of other
service providers to the Fund in failing to observe the instructions of the
Advisor, provided such action or inaction of such other service providers to
the Fund 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
Scudder Kemper under the New Investment Sub-Advisory Agreement.
7
The Advisor pays the fees earned by Scudder Kemper with respect to its
management of the Scudder Portfolio's assets. As compensation for its
services, Scudder Kemper is paid a monthly fee equal on an annual basis to:
0.75% on the first $20 million of average daily net assets; 0.65% on the next
$15 million; 0.50% on the next $65 million; 0.40% on the next $200 million; and
0.30% on assets over $300 million.
The New Investment Sub-Advisory Agreement will remain in effect through
June 30, 1999, unless earlier terminated under the provisions discussed
above. Following the expiration of its initial term, the New Investment
Sub-Advisory Agreement shall continue in effect from year to year only so long
as such continuance is specifically approved at least annually by the Board of
Directors, provided that in such event such continuance shall also be approved
by the vote of a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of any party to this New Investment Sub-Advisory
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).
The description of the New Investment Sub-Advisory Agreement set forth in
this Proxy Statement is qualified in its entirety by the terms of the New
Investment Sub-Advisory Agreement included under Exhibit A attached hereto. If
the New Investment Sub-Advisory Agreement with Scudder Kemper is not approved
by Shareholders, the Board of Directors of the Fund would make such
arrangements for the management of the Scudder Portfolio's investments as it
deemed appropriate and in the best interests of Shareholders.
BOARD OF DIRECTORS EVALUATION
Scudder Kemper has informed the Directors that the Merger Transaction is
not expected to have a material effect on the operations of the Scudder
Portfolio or on its shareholders. No material change in investment philosophy,
policies or strategies is currently envisioned. The Merger Transaction, by its
terms, does not contemplate any changes, other than changes in the ordinary
course of business, in the management or operation of Scudder Kemper relating
to the Scudder Portfolio, the personnel managing the Scudder Portfolio or other
services provided to and business activities of the Scudder Portfolio. The
Merger Transaction also is not expected to result in material changes in the
senior management or personnel of Scudder Kemper. Based on the foregoing,
Scudder Kemper does not anticipate that the Merger Transaction will cause a
reduction in the quality of services or an increase in the cost of services
provided to the Scudder Portfolio, or have any adverse affect on Scudder
Kemper's ability to fulfill its obligations under the New Investment
Sub-Advisory Agreement or on its ability to operate its businesses in a manner
consistent with its current practices.
DIRECTORS' CONSIDERATION
In addition to the factors that the Board of Directors of the Fund
considered in evaluating the Merger Transaction and the effect such Merger
Transaction would have on the Scudder
8
Portfolio, which included (i) that there were no contemplated changes in senior
management or personnel of Scudder Kemper, in the investment philosophy,
policies or strategy of the Scudder Portfolio, or in the quality of services
provided to the Scudder Portfolio by Scudder Kemper and (ii) the undertaking
that no unfair burden would be imposed upon the Scudder Portfolio as a result
of the Merger Transaction, the Board also took into account that the New
Investment Sub-Advisory Agreement, including the terms relating to the services
to be provided, and the fees and expenses payable, thereunder, is on the same
terms in all material respects as the Current Investment Sub-Advisory
Agreement. The Board noted that, in approving the Current Investment
Sub-Advisory Agreement, the Board of the Fund, including the Independent
Directors, had considered a number of factors, including the nature, quality
and extent of the services furnished by Scudder Kemper; the necessity of
Scudder Kemper maintaining and enhancing its ability to retain and attract
capable personnel; Scudder Kemper's experience in investing; possible economies
of scale; Scudder Kemper's investment record; comparative data as to investment
performance, advisory fees and other fees, including administrative fees, and
expense ratios, particularly fee and expense ratios of funds similar to the
Scudder Portfolio, and other investment advisers; the risks assumed by Scudder
Kemper; the advantages and possible disadvantages to the Scudder Portfolio of
having an adviser which also serves other investment companies as well as other
accounts; possible benefits to Scudder Kemper from serving as Sub-Advisor to
the Scudder Portfolio; current and developing conditions in the financial
services industry, including the entry into the industry of large and well
capitalized companies which are spending and appear to be prepared to continue
to spend substantial sums to engage personnel and to provide services to
competing investment companies; Scudder Kemper's financial resources and the
continuance of appropriate incentives to assure that Scudder Kemper will
continue to furnish high quality services to the Scudder Portfolio; and various
other factors.
The Board of Directors of the Fund believes that the terms of the New
Investment Sub-Advisory Agreement are fair to, and in the best interest of, the
Fund, the Scudder Portfolio and the Shareholders of the Scudder Portfolio. The
Fund's Board of Directors, including the Independent Directors of the Fund
voting separately, recommends that Shareholders approve the New Investment
Sub-Advisory Agreement between Scudder Kemper and the Advisor. In making this
recommendation, the Directors considered the nature and quality of the proposed
services to be provided by Scudder Kemper to the Scudder Portfolio, Scudder
Kemper's past performance record, the scope of Scudder Kemper's portfolio
management activities, Scudder Kemper's investment philosophy and process, and
the quality of Scudder Kemper's capabilities generally. The Directors also
examined the background and experience of Scudder Kemper's various officers and
managers, especially those who would have direct involvement in the Scudder
Portfolio's management. Fees charged by entities providing services comparable
to those of Scudder Kemper were also considered.
After a comprehensive review of the matter, the Board of Directors of the
Fund concluded that the Scudder Portfolio should receive investment advisory
services under the New Investment Sub-Advisory Agreement equal or superior to
those it had received under the Current Investment Sub-Advisory Agreement.
9
REQUIRED VOTE AND DIRECTORS RECOMMENDATION FOR PROPOSAL
At the Meeting, the Shareholders of the Scudder Portfolio will vote on the
approval or disapproval of the New Investment Sub-Advisory Agreement.
The affirmative vote of the holders of a "majority of the outstanding
voting securities" of the Scudder Portfolio is required to approve the
proposal. "Majority of the outstanding voting securities" of the Scudder
Portfolio for this purpose under the 1940 Act means the lesser of (1) 67% of
the securities of the Scudder Portfolio present, if more than 50% of the
outstanding securities of the Scudder Portfolio are represented and voting, or
(2) more than 50% of such outstanding securities.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Shares of the Fund are available through the purchase of variable life
insurance and variable annuity policies issued by the Advisor and its
affiliates. As of September 8, 1998, the following person was a beneficial
owner of more than 5% of the outstanding shares of the Scudder Portfolio:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
Aetna Life Insurance and Annuity 26,734,945.433 98.9%
Company
151 Farmington Avenue
Hartford, Connecticut 06156
</TABLE>
To the knowledge of the Scudder Portfolio, no other Shareholder
beneficially owned more than 5% of the outstanding shares of the Scudder
Portfolio as of September 8, 1998.
As of September 8, 1998, the Directors and officers of the Fund
beneficially owned less than 1% of the outstanding shares of the Scudder
Portfolio.
SECURITY OWNERSHIP OF CERTAIN CONTRACT OWNERS
To the best knowledge of the Fund, there were no contract owners who owned
5% or more of the outstanding shares of the Scudder Portfolio as of September
8, 1998.
10
GENERAL INFORMATION
ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT AND PRINCIPAL UNDERWRITER
Investors Bank & Trust Company, located at 200 Clarendon Street, Boston,
Massachusetts 02116, provides administrative, custodial and fund accounting
services for the Fund and serves as transfer agent for the Fund.
Aetna Life Insurance and Annuity Company, located at 151 Farmington
Avenue, Hartford, Connecticut 06156, serves as the Fund's principal
underwriter.
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund's management does not know of any matters to be presented at the
Meeting other than those described in this Proxy Statement. If other business
should properly come before the Meeting, the proxy holders will vote thereon in
accordance with their best judgment.
SCUDDER PORTFOLIO TRANSACTIONS
The Scudder Portfolio does not allocate its portfolio brokerage on the
basis of the sale of its shares, although brokerage firms whose customers
purchase shares of the Scudder Portfolio may participate in brokerage
commissions. Brokerage transactions are not placed with any person affiliated
with the Fund or the Advisor. Scudder Kemper may place brokerage transactions
with Scudder Investor Services, Inc. ("SIS"), an affiliate of Scudder Kemper.
SIS may be a major recipient of brokerage commissions paid by the Fund.
SHAREHOLDER PROPOSALS
The Meeting is a special meeting of Shareholders. The Fund is not required
to, nor does it intend to, hold regular annual meetings of its shareholders or
interest holders. If such a meeting is called, any shareholder who wishes to
submit a proposal for consideration at the meeting should submit the proposal
promptly to the Fund.
REPORTS TO SHAREHOLDERS
The Fund will furnish, without charge, a copy of the most recent Annual
Report to Shareholders of the Fund upon request within three business days of
the request. Requests for such
11
reports can be made by calling 1-800-525-4225 or in writing to the Fund at 151
Farmington Avenue, Hartford, Connecticut 06156-8962.
SCUDDER KEMPER, ZURICH AND B.A.T INDUSTRIES INFORMATION
All information contained in this Proxy Statement concerning Scudder
Kemper, Zurich, B.A.T, their respective affiliates and the Merger Transaction
has been provided by Scudder Kemper.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED, PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors of the Fund.
Susan C. Mosher
Secretary
Hartford, Connecticut
September 30, 1998
12
EXHIBIT A
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
SCUDDER KEMPER INVESTMENTS, INC.
INVESTMENT SUBADVISORY AGREEMENT, made as of the 8th day of September, 1998,
between Aetna Life Insurance and Annuity Company (the "Adviser"), an insurance
corporation organized and existing under the laws of the State of Connecticut,
and Scudder Kemper Investments, Inc. ("Subadviser"), a corporation organized
and existing under the laws of Delaware.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the 25th day of August, 1997 ("Advisory Agreement") with Portfolio Partners,
Inc. ("Company"), which is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHEREAS, the Company is and will continue to be a series fund having two or
more investment portfolios, each with its own assets, investment objectives,
policies and restrictions; and
WHEREAS, the Company shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies and
variable annuity contracts (the "Policies") under which income, gains, and
losses, whether or not realized, from assets allocated to such accounts are,
in accordance with the Policies, credited to or charged against such accounts
without regard to other income, gains, or losses of such insurance companies;
and
WHEREAS, the Subadviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Board of Directors and the Adviser desire to retain the Subadviser
as subadviser for the Scudder 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.
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
13
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.
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,
14
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:
(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.
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
15
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 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.
16
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 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 is effective with respect to the
Portfolio as of September 8, 1998. This Agreement will remain in effect
through June 30, 1999, unless earlier terminated under the provisions of
Section 12. Following the expiration of its initial term, the Agreement shall
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board, provided that in such
event such continuance shall also be approved by the vote of a majority of the
Directors who are not "interested persons" (as defined in the 1940 Act) 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).
17
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 in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into and
perform the services contemplated by this Agreement; and (v) will
immediately notify the Adviser of the occurrence of any event that would
disqualify the Subadviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. The Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already
done so, will provide the Adviser and the Company with a copy of such code
of ethics, together with evidence of its adoption.
C. The Subadviser has provided the Adviser and the Company with a copy of
its Form ADV as most recently filed with the SEC and hereafter will
furnish a copy of its annual amendment to the Adviser.
10. PROVISION OF CERTAIN INFORMATION BY SUBADVISER. The Subadviser will
promptly notify the Adviser in writing of the occurrence of any of the
following events:
A. the Subadviser fails to be registered as an investment adviser under
the Advisers Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
B. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry, or investigation, at law or in equity, before
or by any court, public board, or body, involving the affairs of the
Company;
C. a controlling stockholder of the Subadviser or the portfolio manager
of the Portfolio changes or there is otherwise an actual change in control
or management of the Subadviser.
11. PROVISION OF CERTAIN INFORMATION BY THE ADVISER. The Adviser will
promptly notify the Subadviser in writing of the occurrence of any of the
following events:
A. the Adviser fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry, or investigation, at law or in equity, before
or by any court, public board, or body, involving the affairs of the
Company;
C. a controlling stockholder of the Adviser changes or there is otherwise
an actual change in control or management of the Adviser.
12. TERMINATION OF AGREEMENT. Notwithstanding the foregoing, this Agreement
may be terminated at any time, without the payment of any penalty, by vote of
the Board or by a vote of a majority of the outstanding voting securities of
the Portfolio on 60 days' prior written notice to the Subadviser. This
Agreement may also be terminated by the Adviser: (i) on at least 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
18
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 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.
19
Aetna Life Insurance and Annuity Company
By:
-------------------------------------
Laurie LeBlanc
Attest: Vice President
- ----------------------------------
Rose-Marie DeRensis
Assistant Corporate Secretary
Scudder Kemper Investments, Inc.
By:
-------------------------------------
Cornelia M. Small
Attest: Managing Director
- ----------------------------------
John Lamb
Vice President
20
APPENDIX A
FEE SCHEDULE
Scudder 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
21
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Objective Fee Rate Asset
---- --------- -------- -----
Scudder Long term growth 0.900% to $500 million $2,884,919,345
International of capital 0.850% next $500 million
Fund primarily from 0.800% next $1 billion
foreign equity 0.750% next $1 billion
securities. 0.700% thereafter
Scudder Long term growth 1.000% of net assets** $ 48,880,164
International of capital and
Growth and current income
Income Fund primarily from
foreign equity
securities.
Scudder Variable Long term growth 0.875% to $500 million $ 427,237,880
Life Investment of capital 0.725% thereafter
Fund principally from
International a diversified
Portfolio portfolio of
foreign equity
securities.
- -----------------------
** Subject to waivers and/or expense limitations.
</TABLE>
22
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
(A SEPARATE SERIES OF PORTFOLIO PARTNERS, INC.)
THIS SOLICITATION IS MADE ON BEHALF OF THE DIRECTORS OF
PORTFOLIO PARTNERS, INC.
The undersigned appoints Laurie LeBlanc, Julie E. Rockmore and Susan C.
Mosher and each of them, with full power of substitution, as attorneys and
proxies of the undersigned, and does thereby request that the votes
attributable to the undersigned be cast at the Meeting of Shareholders of the
Scudder International Growth Portfolio (a separate series of Portfolio
Partners, Inc. (the "Fund")) to be held at 10:00 a.m. on November 20, 1998, at
the offices of the Fund, 151 Farmington Avenue, Hartford, Connecticut and at
any adjournment thereof.
- -------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BELOW, OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSAL BELOW.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS A VOTE FOR THE PROPOSAL.
PLEASE VOTE BY CHECKING YOUR RESPONSE.
Approval of a New Investment Sub-Advisory FOR [ ] AGAINST [ ] ABSTAIN [ ]
Agreement between Aetna Life Insurance and
Annuity Company and Scudder Kemper
Investments, Inc.
TOTAL SHARES ATTRIBUTABLE TO THE UNDERSIGNED:
PLEASE VOTE, DATE, SIGN EXACTLY AS YOUR NOTE: THE UNDERSIGNED HEREBY
NAME APPEARS BELOW, AND RETURN THIS FORM ACKNOWLEDGES RECEIPT OF THE
IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NOTICE OF MEETING AND PROXY
STATEMENT AND REVOKES ANY PROXY
HERETOFORE GIVEN WITH RESPECT TO
THE VOTES COVERED BY THIS PROXY.
Dated: ___________________, 1998
_________________________________
Signature
_________________________________
Signature If Jointly Held or
Title If Required
