SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__ )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X ]
Check the appropriate box:
[X ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PORTFOLIO PARTNERS, INC.
(Name of Registrant as Specified in Its Charter/Declaration of Trust)
(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 identify 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:
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PORTFOLIO PARTNERS, INC.
IMPORTANT NEWS FOR SHAREHOLDERS, CONTRACT HOLDERS AND
PARTICIPANTS
While we encourage you to read the full text of the enclosed Proxy Statement,
here's a brief overview of some matters affecting your Fund that will be the
subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Aetna Inc. ("Aetna"), which is the indirect parent company of Aetna Life
Insurance and Annuity Company, ("ALIAC"), the investment adviser to
Portfolio Partners, Inc. (the "Fund"), has agreed to sell its financial
services and international businesses, including ALIAC, to ING Groep N.V.
("ING"). Headquartered in Amsterdam, ING is a global financial institution
active in the fields of insurance, banking, and asset management. After
completion of the transaction, Aetna's financial services and
international businesses will be owned 100% by ING. We are asking
shareholders of each Portfolio in the Fund to approve a new investment
advisory agreement to ensure that there is no interruption in the services
ALIAC provides to your Fund. We are also asking shareholders to approve
certain sub-advisory agreements and the implementation of a
Manager-of-Managers" arrangement. The following pages give you additional
information about ING, the new investment advisory and sub-advisory
agreements, the "Manager-of-Managers" arrangement and certain other
matters. THE BOARD MEMBERS OF THE FUND, INCLUDING THOSE WHO ARE NOT
AFFILIATED WITH THE FUND, ALIAC, ING, OR THE SUB-ADVISERS: MASSACHUSETTS
FINANCIAL SERVICES COMPANY ("MFS"), SCUDDER KEMPER INVESTMENTS, INC.
("SCUDDER"), OR T. ROWE PRICE ASSOCIATES, INC. ("T. ROWE PRICE"), OR ANY
OF THEIR AFFILIATES, RECOMMEND THAT YOU VOTE FOR THESE PROPOSALS.
Q. WHY DID YOU SEND ME THIS BOOKLET?
A. You are receiving these proxy materials--a booklet that includes the Proxy
Statement and one or more proxy cards or authorization cards, as
applicable--because you have the right to vote on important proposals
concerning your investment in the Fund. Although various Aetna entities
are technically, in most cases, the true "shareholders" of the Fund,
variable annuity and variable life contract holders (or participants under
group contracts, as applicable) generally have the right to instruct those
Aetna entities how to vote their interest with respect to the proposals
set forth in the proxy statement, including the consideration of the new
investment advisory and sub-advisory agreements. Therefore, references to
shareholders throughout the proxy materials usually can be read to include
contract holders and participants.
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Q. WHY ARE MULTIPLE CARDS ENCLOSED?
A. If you own shares of more than one Portfolio within the Fund, you will
receive a proxy card or authorization card, as applicable, for each
Portfolio that you own.
Q. WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT ADVISORY AND SUB-
ADVISORY AGREEMENTS?
A. The Aetna-ING transaction will result in a change in ownership of Aetna's
financial services and international businesses which may be deemed to
cause a "change of control" of ALIAC, even though the services provided by
ALIAC are not expected to be materially affected as a result. A "change of
control" may cause the Fund's investment advisory agreement with ALIAC and
each Portfolio's sub-advisory agreement to which ALIAC is a party to
terminate. To ensure continuity of service, we are seeking shareholder
approval of a new investment advisory agreement with your Fund and new
sub-advisory agreements for each Portfolio.
Q. HOW WILL THE AETNA-ING TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A. We do not expect the transaction to affect you as a Fund shareholder.
Your Portfolio and your Portfolio's investment objectives will not change
as a result of the transaction. You will still own the same shares in the
same Portfolio. With the exception of the effective dates of the
agreements, and the "Manager-of-Managers" arrangement described below, the
new investment advisory and sub-advisory agreements are the same in all
material respects as the current agreements. If shareholders do not
approve the new investment advisory or sub-advisory agreements, the
agreements will terminate upon the closing of the Aetna-ING transaction
and the Board Members of the Fund will take such action as they deem to
be in the best interests of your Portfolio and its shareholders.
Q. WILL THE INVESTMENT ADVISORY AND SUB-ADVISORY FEES INCREASE AS A RESULT OF
THE TRANSACTION?
A. No, the proposals to approve the new agreements seek no increase in the
investment advisory and sub-advisory fees.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. As noted above, you are being asked to approve a "Manager-of-Managers"
arrangement for each Portfolio. The Manager-of-Managers arrangement will
allow the Fund's Board of Directors to make changes to sub-advisory
agreements without the delays and expenses of calling special shareholder
meetings.
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Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A. After careful consideration, the Board Members of your Fund, including
those who are not affiliated with the Fund, ALIAC, ING, MFS, Scudder, T.
Rowe Price or their affiliates, recommend that you vote FOR the Proposals
on the enclosed proxy card(s).
Q. WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A. No, ALIAC, ING and/or their affiliates will bear these costs.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call [an Aetna representative][the Fund's information agent], at
1-800-[ ]-[ ].
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Laurie M. Tillinghast
President
Portfolio Partners, Inc.
October [10], 2000
Dear Shareholder:
Aetna Inc. ("Aetna"), the indirect parent company of Aetna Life Insurance
and Annuity Company ("ALIAC"), the investment adviser to Portfolio Partners,
Inc. (the "Fund"), has entered into an agreement to sell its financial services
and international businesses, including ALIAC, to ING Groep N.V. ("ING")(the
"Transaction"). Headquartered in Amsterdam, ING is a global financial
institution active in the fields of insurance, banking, and asset management.
At the shareholder meeting on November 14, 2000, you will be asked to
approve a new advisory agreement and sub-advisory agreements to take effect
after the closing of the transaction. With the exception of the effective dates
of the agreements, provisions relating to the "Manager-of-Managers" arrangement
described below and certain other clarifying modifications, these new
agreements are the same as those currently in effect. Approval of the new
advisory and sub-advisory agreements is sought so that management of the Fund
can continue uninterrupted after the Transaction, because the current
agreements may terminate automatically as a result of the Transaction. At the
shareholder meeting, you also will be asked to approve a "Manager-of-Managers"
arrangement for the Fund. This arrangement will enable the Board of Directors,
without further shareholder approval, to appoint sub-advisers for each
Portfolio in the future.
After careful consideration, the Fund's Board of Directors unanimously
approved each of the proposals and recommends that shareholders vote "FOR" each
proposal.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT AND CAST YOUR VOTE. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN NOVEMBER 13, 2000.
If you are a shareholder of more than one series of the Fund, or have more
than one account registered in your name, you will receive one proxy card or
authorization card, as applicable, for each account. PLEASE VOTE AND RETURN
EACH PROXY CARD THAT YOU RECEIVE.
If you have any questions before you vote, please call [1-800- , Option ].
We'll help you get the answers you need promptly. We appreciate your
participation and prompt response in this matter and thank you for your
continued support.
Sincerely,
Laurie M. Tillinghast
(formerly Laurie M. LeBlanc)
(enclosures)
<PAGE>
NOTICE OF A SPECIAL MEETING
OF THE SHAREHOLDERS OF
PORTFOLIO PARTNERS, INC.
Notice is hereby given that a Special Meeting of the Shareholders (the
"Special Meeting") of Portfolio Partners, Inc. (the "Fund") will be held on
November 14, 2000, at 10:00 a.m., Eastern time, at 151 Farmington Avenue,
Hartford, Connecticut 06156-8962, for the following purposes:
1. For shareholders of each Portfolio of the Fund to approve a new Investment
Advisory Agreement between Portfolio Partners, Inc. and Aetna Life
Insurance and Annuity Company ("ALIAC") as a result of the acquisition of
the financial services and international businesses of Aetna Inc.
("Aetna"), of which ALIAC is an indirect wholly-owned subsidiary, by
ING Groep N.V. ("ING"), with no change in the advisory fees payable to
ALIAC;
2. For shareholders of MFS Capital Opportunities Portfolio, MFS Emerging
Equities Portfolio, and MFS Research Growth Portfolio to approve a new
Sub-Advisory Agreement between ALIAC and Massachusetts Financial Services
Company ("MFS") to reflect the acquisition of the financial services and
international businesses of Aetna by ING, with no change in the sub-advisory
fee payable to MFS;
3. For shareholders of Scudder International Growth Portfolio to approve a
new Sub-Advisory Agreement between ALIAC and Scudder Kemper Investments,
Inc. ("Scudder") to reflect the acquisition of the financial services and
international businesses of Aetna by ING, with no change in the sub-advisory
fee payable to Scudder;
4. For shareholders of T. Rowe Price Growth Equity Portfolio to approve a new
Sub-Advisory Agreement between ALIAC and T. Rowe Price Associates, Inc.
("T. Rowe Price") to reflect the acquisition of the financial services and
international businesses of Aetna by ING, with no change in the sub-advisory
fee payable to T. Rowe Price;
5. For shareholders of the Fund to approve a "Manager-of-Managers"
arrangement for each Portfolio of the Fund;
6. To transact such other business as may properly come before the Special
Meeting and any adjournments thereof.
Please read the enclosed proxy statement carefully for information
concerning the proposals to be placed before the Special Meeting.
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Shareholders of record at the close of business on September 8, 2000 are
entitled to notice of and to vote at the Special Meeting. You are invited to
attend the Special Meeting. If you cannot do so, however, PLEASE COMPLETE AND
SIGN THE ENCLOSED PROXY, AND RETURN IT IN THE ACCOMPANYING ENVELOPE AS PROMPTLY
AS POSSIBLE. Any shareholder attending the Special Meeting may vote in person
even though a proxy has already been returned.
By Order of the Board of Directors,
Susan C. Mosher
Secretary
October [10], 2000
<PAGE>
PRELIMINARY COPY
PORTFOLIO PARTNERS, INC.
151 Farmington Avenue
Hartford, Connecticut 06156-8962
(800) - [ ]
PROXY STATEMENT
October [10], 2000
This Proxy Statement provides you with information you should review
before voting on the matters listed in the Notice of Special Meeting (each a
"Proposal") on the previous page for Portfolio Partners, Inc. (the "Fund"). The
Fund's Board of Directors is soliciting your vote for a Special Meeting of
Shareholders of the Fund (the "Special Meeting") to be held at 151 Farmington
Avenue, Hartford, Connecticut 06156-8962, on November 14, 2000, at 10:00 a.m.,
Eastern time, and, if the Special Meeting is adjourned, at any adjournment of
that Meeting. The Fund currently offers five investment portfolios (each, a
"Portfolio" and collectively, the "Portfolios"). The Portfolios are: MFS
Capital Opportunities Portfolio, MFS Emerging Equities Portfolio, MFS Research
Growth Portfolio, Scudder International Growth Portfolio and T. Rowe Price
Growth Equity Portfolio.
SOLICITATION OF PROXIES
The Fund's Board of Directors is soliciting votes from shareholders of the
Fund. The solicitation of votes is made by the mailing of this Proxy Statement
and the accompanying proxy card or authorization card, as applicable, on or
about October 10, 2000. The appointed proxies will vote in their discretion on
any other business as may properly come before the Special Meeting or any
adjournments or postponements thereof. Additional matters would only include
matters that were not anticipated as of the date of this Proxy Statement. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to the Fund a written notice of revocation or a subsequently
executed proxy or by attending the Special Meeting and electing to vote in
person.
SHAREHOLDER REPORTS
COPIES OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, AND ITS SEMI-ANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2000, HAVE
PREVIOUSLY BEEN MAILED TO SHAREHOLDERS. THIS PROXY STATEMENT SHOULD BE READ IN
CONJUNCTION WITH THE ANNUAL AND SEMI-ANNUAL REPORTS. YOU CAN OBTAIN COPIES OF
THOSE REPORTS, WITHOUT CHARGE, BY WRITING TO AETNA LIFE INSURANCE AND ANNUITY
COMPANY, 151 FARMINGTON AVENUE, HARTFORD, CONNECTICUT, 06156-8962, ATTENTION: [
], OR BY CALLING 1-888- [ ] THE ANNUAL AND SEMI-ANNUAL REPORTS ARE NOT TO BE
REGARDED AS PROXY SOLICITING MATERIAL.
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The following table summarizes the proposals to be voted on at the Special
Meeting and indicates those shareholders that are being solicited with respect
to each proposal.
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PROPOSAL SHAREHOLDERS SOLICITED
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1. To approve a new Investment Advisory All Portfolios, each voting
Agreement between the Fund and Aetna separately as a Portfolio
Life Insurance and Annuity Company
("ALIAC")
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2. To approve a new Sub-Advisory Shareholders of the MFS Capital
Agreement between ALIAC and Opportunities Portfolio (formerly
Massachusetts Financial Services ( "MFS") MFS Value Equity Portfolio), MFS
Emerging Equities Portfolio and MFS
Research Growth Portfolio only, each
voting separately as a Portfolio
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3. To approve a new Sub-Advisory Shareholders of the Scudder
Agreement between ALIAC and Scudder International Growth Portfolio only
Kemper Investments, Inc. ("Scudder")
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4. To approve a new Sub-Advisory Shareholders of the T. Rowe Price
Agreement between ALIAC and T. Rowe Growth Equity Portfolio only
Price Associates, Inc. ( "T. Rowe Price")
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5. To approve a "Manager-of-Managers" All Portfolios, each voting
arrangement for each Portfolio of the separately as a Portfolio
Fund
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6. To transact such other business as Any and/or all Portfolios, voting
may properly come before the Special together or each voting separately
Meeting and any adjournments thereof as a Portfolio as the circumstances
may dictate
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF EACH PROPOSAL.
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GENERAL OVERVIEW
On July 19, 2000, Aetna Inc. ("Aetna") entered into an agreement to sell
certain of its businesses, including Aetna Life Insurance and Annuity Company
("ALIAC"), to ING Groep N.V. ("ING") (the "Transaction"). ING is a global
financial institution active in the fields of insurance, banking and asset
management. Headquartered in Amsterdam, it conducts business in more than 60
countries, and has almost 90,000 employees. ING seeks to provide a full range
of integrated financial services to private, corporate, and institutional
clients through a variety of distribution channels. As of [June 30, 2000], ING
had total assets of approximately $[471.8] billion and assets under
management of approximately $[330.3] billion. ING includes, among its numerous
direct and indirect subsidiaries, Baring Asset Management, Inc., ING Investment
Management Advisors B.V., ReliaStar Financial Corp., Furman Selz Capital
Management LLC, and ING Investment Management LLC. Consummation of the
Transaction is subject to a number of contingencies, including regulatory and
shareholder approval and other closing conditions. Aetna's goal is to
close the Transaction during the fourth quarter of 2000.
The Fund operations of ALIAC are not expected to be affected by the
Transaction. ALIAC does not currently anticipate that there will be any changes
in the investment personnel primarily responsible for the management of the
Fund as a result of the Transaction. Following the Transaction, ING anticipates
that it will evaluate capabilities across the ING companies and, where
appropriate, will consider changes designed to maximize investment capabilities
and achieve expense and resource efficiencies.
ING's principal executive offices are located at Strawinskylaan 2631, 1077
zz Amsterdam, the Netherlands.
MATTERS TO BE ACTED UPON
PROPOSAL NO. 1
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
(ALL PORTFOLIOS)
Shareholders of each series of the Fund are being asked to approve a new
Investment Advisory Agreement (the "New Advisory Agreement") between the Fund,
on behalf of each Portfolio (each a "Portfolio" and collectively the
"Portfolios"), and ALIAC. APPROVAL OF THE NEW ADVISORY AGREEMENT IS SOUGHT SO
THAT THE MANAGEMENT OF EACH PORTFOLIO CAN CONTINUE UNINTERRUPTED AFTER THE
TRANSACTION, BECAUSE THE CURRENT INVESTMENT ADVISORY AGREEMENT (THE "CURRENT
AGREEMENT") MAY TERMINATE AUTOMATICALLY AS A RESULT OF THE TRANSACTION.
Aetna's goal is to close the Transaction during the fourth quarter of
2000. [As a result of this Transaction, Aetna will become a wholly-owned
subsidiary of ING America Insurance Holdings, Inc., a subsidiary of ING. ALIAC
will remain an indirect wholly-owned subsidiary of Aetna, although Aetna will
be renamed in connection with the Transaction.] The change in ownership of
ALIAC resulting from this Transaction may be deemed under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), to be an
assignment of the Current Agreement. The Current Agreement provides for its
automatic termination upon an
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assignment. Accordingly, a New Advisory Agreement between ALIAC and the Fund,
on behalf of each Portfolio, is proposed for approval by shareholders of each
Portfolio. A form of the New Advisory Agreement is attached as Exhibit 1 to
this Proxy Statement and the description of its terms in this section is
qualified in its entirety by reference to Exhibit 1.
Each Portfolio commenced operations on November 28, 1997. The Current
Agreement, with respect to each Portfolio, was entered into and approved by
each Portfolio's sole initial shareholder on September 18, 1997. The Fund's
Board of Directors last approved the Current Agreement on February 9, 2000.
ALIAC does not anticipate that the Transaction will cause any reduction in
the quality of services now provided to the Portfolios or have any adverse
affect on ALIAC's ability to fulfill its obligations to the Portfolios.
At the September 14, 2000 meeting of the Fund's Board of Directors, the
New Advisory Agreement was approved unanimously by the Board, including all of
the Directors who are not parties to the New Advisory Agreement or interested
persons of any such parties. The New Advisory Agreement as approved by the
Fund's Board of Directors is submitted for approval by the shareholders of the
Portfolios. The New Advisory Agreement must be voted upon separately by the
shareholders of each Portfolio.
If the New Advisory Agreement is approved by shareholders, it will take
effect immediately after the closing of the Transaction. The New Advisory
Agreement will remain in effect for two years from the date it takes effect,
and, unless earlier terminated, will continue from year to year thereafter,
provided that each such continuance is approved annually with respect to the
Portfolios (i) by the Fund's Board of Directors or by the vote of a majority of
the outstanding voting securities of the particular Portfolio, and, in either
case, (ii) by a majority of the Fund's Directors who are not parties to the New
Advisory Agreement or "interested persons" of any such party (other than as
Directors of the Fund).
THE TERMS OF THE NEW ADVISORY AGREEMENT
The terms of the New Advisory Agreement will be the same in all material
respects to the Current Agreement, except for the effective date and the
addition of provisions related to the adoption of a "Manager-of-Managers"
arrangement, subject to the approval of such an arrangement by shareholders of
each Portfolio under Proposal 5 below.
The New Advisory Agreement requires ALIAC, subject to the policies and
control of the Fund's Board of Directors, to (i) supervise all aspects of the
operations of the Portfolios, (ii) select the securities to be purchased, sold
or exchanged by the Portfolios or otherwise represented in the Portfolios'
investment portfolios, place trades for all such securities and regularly
report thereon to the Fund's Board of Directors, (iii) formulate and implement
continuing programs for the purchase and sale of securities and regularly
report thereon to the Fund's Board of Directors, (iv) obtain and evaluate
pertinent information about significant developments and economic, statistical
and financial data, domestic, foreign or otherwise, whether affecting the
economy generally, the Fund, securities held by or under consideration for
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the Fund, or the issuers of those securities, (v) provide economic research and
securities analyses as ALIAC considers necessary or advisable in connection
with ALIAC's performance of its duties thereunder, (vi) obtain the services of,
contract with, and provide instructions to custodians and/or subcustodians of
the Fund's securities, transfer agents, dividend paying agents, pricing
services and other service providers as are necessary to carry out the terms of
the Agreement, and (vii) take any other actions which appear to ALIAC and the
Fund's Board of Directors necessary to carry into effect the purposes of the
New Agreement.
Under the Current Agreement, subject to the approval of the Fund's Board
of Directors and the shareholders of a particular Portfolio, ALIAC may enter
into sub-advisory agreements to engage one or more sub-advisers to ALIAC with
respect to the Portfolios. Under the New Advisory Agreement, (subject to
shareholder approval of a "Manager-of-Managers" arrangement for each Portfolio
as set forth in Proposal 5 below), ALIAC may enter into sub-advisory agreements
to engage one or more sub-advisers to ALIAC with respect to each of the
Portfolios, subject to the approval of the Board of Directors of the Fund and
without seeking further shareholder approval from the applicable Portfolio.
Under the New Advisory Agreement, in the event the Board of Directors of
the Fund engages one or more sub-advisers with respect to each of the
Portfolios, ALIAC shall be required to: (i) monitor the investment program
maintained by the sub-adviser for the Portfolios and the sub-adviser's
compliance program to ensure that the Portfolios' assets are invested in
compliance with the sub-advisory agreement and the Portfolios' investment
objectives and policies as adopted by the Fund's Board of Directors and
described in the most current effective amendment of the registration
statement, as filed with the Commission under the Securities Act of 1933 ( the
"1933 Act") and the Investment Company Act ("Registration Statement"); (ii)
review all data and financial reports prepared by the sub-adviser to assure
that they are in compliance with applicable requirements and meet the
provisions of applicable laws and regulations; (iii) establish and maintain
regular communications with the sub-adviser to share information it obtains
with the sub-adviser concerning the effect of developments and data on the
investment program maintained by the sub-adviser; and (iv) oversee all matters
relating to the offer and sale of the Portfolios' shares, the Fund's corporate
governance, reports to the Fund's Board of Directors, contracts with all third
parties on behalf of the Fund for services to the Portfolios, reports to
regulatory authorities and compliance with all applicable rules and regulations
affecting the Fund's operations.
The New Advisory Agreement also provides that ALIAC shall place all orders
for the purchase and sale of portfolio securities for the Fund with brokers or
dealers selected by ALIAC, which may include brokers or dealers affiliated with
ALIAC. ALIAC is obligated to use its best efforts to seek to execute portfolio
transactions at prices that are advantageous to the Fund and at commission
rates that are reasonable in relation to the benefits received. In selecting
broker-dealers qualified to execute a particular transaction, brokers or
dealers may be selected who also provide brokerage or research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934
(the "Exchange Act") to ALIAC and/or the other accounts over which ALIAC or its
affiliates exercise investment discretion. ALIAC is authorized to pay a broker
or dealer who provides such brokerage or research services a commission for
executing a portfolio transaction for the Fund that is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if ALIAC determines in good faith
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that such amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer and is paid in
compliance with Section 28(e). This determination may be viewed in terms of
either that particular transaction or the overall responsibilities that ALIAC
and its affiliates have with respect to accounts over which they exercise
investment discretion. The New Advisory Agreement provides that the Fund's
Board of Directors shall periodically review the commissions paid by the Fund
to determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits received. Any delegation to a
sub-adviser of the selection of broker-dealers to execute portfolio
transactions must include instructions that are consistent with the parameters
outlined above.
Any investment program undertaken by ALIAC pursuant to the New Advisory
Agreement, as well as any other activities undertaken by ALIAC on behalf of the
Fund pursuant thereto, shall at all times be subject to any directives of the
Fund's Board of Directors. The annual advisory fees for the Fund under the
Current Advisory Agreement and the New Advisory Agreement are listed in
Appendix 5 to this Proxy Statement.
Under the New Advisory Agreement, the expenses in connection with the
management of each Portfolio shall be allocated between the applicable
Portfolio and ALIAC as follows: (1) ALIAC shall pay: (a) the salaries,
employment benefits and other related costs and expenses of those of its
personnel engaged in providing investment advice to the Portfolio, including
without limitation, office space, office equipment, telephone and postage
costs; and (b) all fees and expenses of all Directors, officers and employees,
if any, of the Fund who are employees of ALIAC, including any salaries and
employment benefits payable to those persons; (2) the Portfolio shall pay: (a)
investment advisory fees pursuant to the Agreement; (b) brokers' commissions,
issue and transfer taxes or other transaction fees payable in connection with
any transactions in the securities in the Portfolio's investment portfolio or
other investment transactions incurred in managing the Portfolio's assets,
including portions of commissions that may be paid to reflect brokerage
research services provided to ALIAC; (c) fees and expenses of the Portfolio's
independent accountants and legal counsel and the independent Directors' legal
counsel; (d) fees and expenses of any administrator, transfer agent, custodian,
dividend, accounting, pricing or disbursing agent of the Portfolio; (e)
interest and taxes; (f) fees and expenses of any membership in the Investment
Company Institute or any similar organization in which the Fund's Board of
Directors deems it advisable for the Fund to maintain membership; (g) insurance
premiums on property or personnel (including officers and Directors) of the
Fund; (h) all fees and expenses of the Fund's Board of Directors, who are not
"interested persons" (as defined in the Investment Company Act) of the Fund or
ALIAC; (i) expenses of preparing, printing and distributing proxies, proxy
statements, prospectuses and reports to shareholders of the Portfolio, except
for those expenses paid by third parties in connection with the distribution of
Portfolio shares and all costs and expenses of shareholders' meetings; (j) all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares of the Portfolio or in cash; (k) costs and
expenses (other than those detailed in (2)(i) above) of promoting the sale of
shares in the Portfolio, including preparing prospectuses and reports to
shareholders of the Portfolio, provided that nothing in the New Advisory
Agreement shall prevent the charging of such costs to third parties involved in
the distribution and sale of Portfolio shares; (l) fees payable by the
Portfolio to the Securities and Exchange Commission ("SEC") or to any state
securities regulator or other regulatory authority for the registration of
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shares of the Fund in any state or territory of the United States or of the
District of Columbia; (m) all costs attributable to investor services,
administering shareholder accounts and handling shareholder relations,
(including, without limitation, telephone and personnel expenses), which costs
may also be charged to third parties by ALIAC; and (n) any other ordinary,
routine expenses incurred in the management of the Portfolio's assets, and any
nonrecurring or extraordinary expenses, including organizational expenses,
litigation affecting the Fund and any indemnification by the Portfolio of its
officers, Directors or agents.
The New Advisory Agreement provides that the services of ALIAC to the Fund
are not deemed to be exclusive, and ALIAC shall be free to render investment
advisory or other services to others (including other investment companies) and
to engage in other activities, so long as its services under the New Advisory
Agreement are not impaired thereby.
Like the Current Agreement, the New Advisory Agreement provides that ALIAC
shall be liable to the Fund and shall indemnify the Fund for any losses
incurred by the Fund, whether in the purchase, holding or sale of any security
or otherwise, to the extent that such losses resulted from an act or omission
on the part of ALIAC or its officers, directors or employees, that is found to
involve willful misfeasance, bad faith or negligence, or reckless disregard by
ALIAC of its duties under the New Advisory Agreement, in connection with the
services rendered by ALIAC thereunder.
Each agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Board of Directors or by vote of a majority of
the Portfolios' outstanding voting securities (as defined in Section 2(a)(42)
of the Investment Company Act), or by ALIAC, on sixty (60) days' written notice
to the other party. Notice provided for in each agreement may be waived by the
party required to be notified. Each agreement will automatically terminate in
the event of its "assignment."
EXPENSE LIMITATIONS
Like the Current Agreement, the New Advisory Agreement will not place any
limits on the operating expenses of the Fund or any Portfolio. However, ALIAC
has voluntarily agreed to limit the expenses of each Portfolio through at least
April 30, 2001. The terms of the voluntary expense limitation will not be
affected by the Transaction. The expense limitation for each Portfolio is shown
in Appendix 6.
INFORMATION ABOUT ALIAC
ALIAC is a Connecticut insurance corporation with its principal offices at
151 Farmington Avenue, Hartford, Connecticut 06156. ALIAC is an indirect
wholly-owned subsidiary of Aetna, a financial services company with stock
listed for trading on the New York Stock Exchange. Please refer to Appendix 7
to this Proxy Statement for the name and address of ALIAC's parent company and
the names and addresses of its immediate parents. Appendix 7 also contains a
list of the Directors and principal executive officers of ALIAC and their
addresses, and identifies those individuals serving as officers and/or
Directors of the Fund that are also officers and/or Directors of ALIAC. ALIAC
is registered with the SEC as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act").
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For the fiscal year ended December 31, 1999, the total advisory fees paid
to ALIAC by the Portfolios were as follows: MFS Capital Opportunities,
$734,991; MFS Emerging Equities, $1,073,994; MFS Research Growth, $79,213;
Scudder International Growth, $3,813,374; and T. Rowe Price Growth Equity,
$6,073,693.
From time to time, ALIAC may receive brokerage and research services from
brokers that execute securities transactions for the Portfolios. The commission
paid by a Portfolio to a broker that provides such services to ALIAC or its
sub-advisers may be greater than the commission would be if the Portfolio used
a broker that does not provide the same level of brokerage and research
services. During the most recent fiscal year ended December 31, 1999, the
Portfolios had not effected any brokerage transactions in portfolio securities
with ALIAC or any other affiliated person of the Fund.
In addition to providing investment advisory services, ALIAC serves as
administrator to the Fund pursuant to an Administrative Services Agreement and
provides certain administrative and shareholder services necessary for Fund
operations. The Fund's Board of Directors approved a New Administrative
Services Agreement during the Special Meeting of the Board of Directors on
September 14, 2000. The terms of the New Administrative Services Agreement are
identical to the original Administrative Services Agreement except for the
effective date. The New Administrative Services Agreement will take effect
immediately after the closing of the Transaction. Under the New Administrative
Services Agreement, ALIAC has agreed to: (a) provide office space, equipment
and facilities (which may belong to the Administrator or its affiliates) for
maintaining the Fund's organization, for meetings of the Fund's Board of
Directors and shareholders, and for performing administrative services
hereunder; (b) supervise and manage all aspects of the Fund's operations (other
than investment advisory activities), and supervise relations with, and monitor
the performance of, custodians, depositories, transfer and pricing agents,
accountants, attorneys, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary and desirable by the Board; (c)
determine and arrange for the publication of the net asset value of the shares
of each Portfolio; (d) provide non-investment related statistical and research
data and such other reports, evaluations and information as the Portfolios may
request from time to time; (e) provide internal clerical, accounting and legal
services, and stationery and office supplies; (f) prepare, amend, and update
(with the advice of the Fund's counsel) the Fund's Registration Statement on
Form N-1A and state Blue Sky filings, and prepare any necessary proxy
statements and all annual and semi-annual reports to shareholders; (g) arrange
for the printing and mailing (at the expense of the Fund or affected Portfolio)
of proxy statements and other reports or other materials provided to
shareholders; (h) prepare for execution and file each Portfolio's federal and
state tax returns and required tax filings other than those required to be made
by the Portfolios' custodian and transfer agent; (i) maintain the Fund's
existence, and during such times as the shares of the Portfolios are publicly
offered, maintain the registration and qualification of the shares under
federal and state law; (j) keep and maintain the financial accounts and records
of the Fund; (k) develop and implement, if appropriate, management or
shareholder services designed to enhance the convenience of investing in the
Portfolios; (l) provide the Board on a regular basis with reports and analyses
of the Portfolios' operations and the operations of comparable investment
companies; (m) respond to inquiries from shareholders or participants of
employee benefit plans (for which the Administrator or any affiliate provides
recordkeeping) relating to the Portfolios, concerning, among other things,
exchanges among Portfolios, refer any such inquiries to the Fund's officers or
the Portfolios' transfer agent; (n) provide recordkeeping services; and (o)
provide such information as may be reasonably
8
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requested by a shareholder representative of or a participant in an employee
benefit plan to comply with applicable federal or state laws. For its services
under the New Administrative Services Agreement, ALIAC is entitled to receive
from each Portfolio a fee computed at an annual rate of each Portfolio's
average daily net assets as set forth below:
Portfolio Fee
--------- ---
MFS Capital Opportunities 0.25%
MFS Emerging Equities 0.13%
MFS Research Growth 0.15%
Scudder International Growth 0.20%
T. Rowe Price Growth Equity 0.15%
For the fiscal year ended December 31, 1999, the total administrative
services fees paid to ALIAC by the Portfolios were as follows: MFS Capital
Opportunities, $585,618; MFS Emerging Equities, $1,477,831; MFS Research
Growth, $743,001; Scudder International Growth, $1,003,850; and T. Rowe Price
Growth Equity, $953,603.
Under an Underwriting Agreement between ALIAC and Portfolio Partners, Inc.
(the "Current Underwriting Agreement"), ALIAC also has served as the Fund's
principal underwriter for the continuous offering of shares of the Fund. Under
the Current Underwriting Agreement, ALIAC did not receive compensation for
providing these services. Aetna's management has recently determined that it
would be prudent to consolidate its various broker/dealer operations in order
to better align functions and management within Aetna's subsidiaries.
Accordingly, the Fund's Board of Directors, at its September 14, 2000 meeting,
approved a New Underwriting Agreement by and between the Fund and Aetna
Investment Services, Inc., ("AISI"), an affiliate of ALIAC. The New
Underwriting Agreement is identical to the Current Underwriting Agreement,
except for the effective date and AISI as the Fund's new principal underwriter.
EVALUATION BY THE BOARD OF DIRECTORS
In determining whether or not it was appropriate to approve the New
Advisory Agreement and to recommend approval to shareholders, the Fund's Board
of Directors, including the Directors who are not interested persons of ALIAC
(the "Independent Directors"), considered various materials and representations
provided by ALIAC and met with a representative of ING. The Independent
Directors were advised by independent legal counsel with respect to these
matters. The Board's Contracts Committee, consisting of the Independent
Directors, and the full Board each met on September 14, 2000, to review and
consider, among other things, information relating to the New Advisory
Agreement.
Information considered by the Directors included, among other things, the
following: (1) ALIAC's and ING's representations that the Fund operations of
ALIAC are not expected to be affected as a result of the Transaction and that
in the short-term there are not expected to be any changes in the personnel
primarily responsible for management of the Fund as a result of the
9
<PAGE>
Transaction; (2) that the senior personnel responsible for the management of
ALIAC are expected to continue to be responsible for the management of ALIAC;
(3) that the compensation to be received by ALIAC under the New Advisory
Agreement is the same as the compensation paid under the Current Agreement; (4)
Aetna's and ING's representation that each will use its reasonable best efforts
to ensure that an "unfair burden" (as defined in the Investment Company Act) is
not imposed on the Portfolios as a result of the Transaction; (5) the
commonality of the terms and provisions of the New Advisory Agreement and
Current Agreement; (6) ING's financial strength and commitment to the advisory
business; (7) ING's strong distribution capabilities; and (8) ALIAC's
representation that it intends to maintain any expense limitations currently in
effect for the period contemplated by the applicable provision.
Further, the Fund's Board of Directors reviewed (1) the nature and quality
of the services rendered by ALIAC under the Current Agreement, (2) the fairness
of the compensation payable to ALIAC under the New Advisory Agreement, (3) the
performance results achieved by each Portfolio, and (4) the personnel,
operations and financial condition, and investment management capabilities,
methodologies, and performance of ALIAC. The Board also considered the services
provided by ALIAC as administrator to the Fund, including the fees received by
ALIAC for such administrative services.
Based upon its review, the Board determined that, by approving the New
Advisory Agreement, the Fund can best be assured that services from ALIAC will
be provided without interruption. The Board also determined that the New
Advisory Agreement is in the best interests of each Portfolio and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information it considered relevant, the Fund's Board of
Directors unanimously approved the New Advisory Agreement and voted to
recommend its approval by each Portfolio's shareholders.
The effectiveness of this Proposal No. 1 is conditioned on the
consummation of the Transaction. Accordingly, in the event that the Transaction
is not consummated, ALIAC will continue to manage the Portfolios pursuant to
the Current Agreement. If a Portfolio's shareholders fail to approve the New
Advisory Agreement pertaining to that Portfolio, the Fund's Board of Directors
shall meet to consider appropriate action for that Portfolio.
INTERESTS OF OFFICERS AND DIRECTORS IN THE TRANSACTION
The Fund's executive officers and its Directors who are affiliated with
Aetna are shareholders of Aetna. If the Transaction is completed, Aetna
shareholders will receive one share of common stock of the new health care
company to be formed in connection with the Transaction and approximately $35
in cash for each share of Aetna common stock that they own. The exact amount of
cash Aetna shareholders will receive for each share of Aetna common stock that
they own will depend on a number of factors, including the number of shares of
Aetna common stock that are outstanding as of completion of the Transaction, the
amount of unpaid interest that has accrued as of the closing on certain Aetna
debt to be assumed by ING and certain other matters.
The Fund's executive officers and its Directors who are affiliated with
Aetna may have interests in the Transaction that are different from, or in
addition to, their interests as
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shareholders of Aetna generally. Aetna's Board of Directors previously approved
provisions to protect certain benefits of Aetna employees upon a change in
control of Aetna, which includes the Transaction. The provisions provide that
the Aetna severance plan (discussed below) will become noncancellable for a
period of two years following a change in control. Also, all previously granted
stock options that have not yet vested will become vested and immediately
exercisable. Upon a change in control, bonuses payable under Aetna's Annual
Incentive Plan will become payable based on the target award for participants.
In connection with the closing of the Transaction, Aetna may also pay other
bonuses. In addition, long-term incentive awards granted under Aetna's 1996
Stock Incentive Plan, will vest.
Aetna administers a severance plan under which employees, including
Aetna's executive officers, terminated by Aetna without cause may receive up to
two weeks of continuing salary for every credited full year of employment to a
maximum of one year's salary. In addition, when an employee's job is eliminated
due to reengineering, reorganization or staff reduction efforts, an employee,
including Aetna's executive officers, are eligible for an additional 13 weeks
of salary continuation and outplacement assistance. Under certain
circumstances, determined on a case-by-case basis, additional severance pay
benefits may be granted for the purposes of inducing employment of senior
officers or rewarding past service. Certain benefits continue during the
severance pay and salary continuation periods.
VOTE REQUIRED
Shareholders of each Portfolio must approve the New Advisory Agreement
with respect to that Portfolio. Approval of this Proposal No. 1 by a Portfolio
requires an affirmative vote of the lesser of (i) 67% or more of such
Portfolio's shares present at the Special Meeting if more than 50% of the
outstanding shares of such Portfolio are present or represented by proxy, or
(ii) more than 50% of the outstanding shares of such Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL
NO. 1.
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PROPOSAL NO. 2
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR
MFS CAPITAL OPPORTUNITIES PORTFOLIO
MFS EMERGING EQUITIES PORTFOLIO
MFS RESEARCH GROWTH PORTFOLIO
Shareholders of MFS Capital Opportunities Portfolio, MFS Emerging Equities
Portfolio, and MFS Research Growth Portfolio of the Fund, (each an " MFS
Portfolio" and collectively "the MFS Portfolios") are being asked to approve a
new Sub-Advisory Agreement with Massachusetts Financial Services Company ("MFS"
or the "Sub-Adviser") for the MFS Portfolios. SHAREHOLDER APPROVAL OF A NEW MFS
SUB-ADVISORY AGREEMENT BETWEEN ALIAC AND MFS ON BEHALF OF THE PORTFOLIOS (THE
"NEW MFS AGREEMENT") IS BEING SOUGHT SO THAT THE MANAGEMENT OF THE MFS
PORTFOLIOS CAN CONTINUE UNINTERRUPTED AFTER THE TRANSACTION, BECAUSE THE
CURRENT SUB-ADVISORY AGREEMENT WITH MFS (THE "CURRENT MFS AGREEMENT") FOR THE
MFS PORTFOLIOS MAY TERMINATE AUTOMATICALLY AS A RESULT OF THE TRANSACTION. A
form of the New MFS Agreement is attached as Exhibit 2 to this Proxy Statement
and the description of its terms in this section is qualified in its entirety
by reference to Exhibit 2.
While the Board of Directors of the Fund is seeking shareholder approval
of a New MFS Agreement, such Agreement does not restrict the Board's ability to
terminate or replace MFS as Sub-Adviser for the MFS Portfolios at any time in
the future, subject to any shareholder approval that may be required. In
addition, if the adoption of the "Manager-of-Managers" arrangement, as
discussed below under Proposal No. 5, is adopted by each Portfolio, the Board
of Directors can terminate or replace MFS with respect to each such Portfolio
without further shareholder approval.
The New MFS Agreement must be voted upon separately by shareholders of
each MFS Portfolio. If a New MFS Agreement is approved by shareholders of the
MFS Portfolios, then such agreement will take effect immediately after the
closing of the Transaction. The New MFS Agreement will remain in effect for two
years from the date it takes effect, and, unless earlier terminated, will
continue in effect from year to year thereafter, provided that each such
continuance is approved at least annually by the Board, including a majority of
the Fund's Directors who are not parties to the New MFS Agreement or
"interested persons" of any such party (other than as Directors of the Fund).
At the September 14, 2000 meeting of the Fund's Board of Directors, the
New MFS Agreement was approved unanimously by the Board, including all of the
Directors who are not parties to the New MFS Agreement or interested persons of
such parties.
TERMS OF THE NEW MFS AGREEMENT
The terms of the New MFS Agreement will be the same in all material
respects as those of the Current MFS Agreement, except for the effective date,
and the manner in which the
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<PAGE>
Agreement shall be continued. The New MFS Agreement, like the Current MFS
Agreement requires MFS, under the supervision of ALIAC and subject to the
approval and direction of the Fund's Board of Directors, to manage each MFS
Portfolio's assets.
The New MFS Agreement states that MFS shall regularly provide investment
advice with respect to the assets held by the MFS Portfolios, and shall be
authorized to (a) buy, sell, exchange, convert, lend or otherwise trade in any
stocks, bonds, and other securities or assets on behalf of each MFS Portfolio,
and (b) 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 MFS may select. In carrying out these
duties, MFS is required to: (i) regularly (but no less frequently than
quarterly) report to the Fund's Board of Directors and to ALIAC with respect to
the implementation of the investment program and, in addition, provide such
statistical information and special reports concerning the MFS Portfolios
and/or important developments materially affecting the investments held, or
contemplated to be purchased, by the MFS Portfolios, as may reasonably be
requested by the Fund's Board of Directors or ALIAC and agreed to by MFS,
including attendance at Board meetings, as reasonably requested, to present
such information and reports to the Fund's Board of Directors; (ii) consult
with the Fund'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 Investment Company Act and
for which market quotations are not readily available; (iii) provide any and
all information, records and supporting documentation about the accounts MFS
manages that have investment objectives, policies, and strategies substantially
similar to those employed by MFS in managing the MFS Portfolios which may be
reasonably necessary, under applicable laws, to allow the Fund or its agent to
present historical performance information concerning MFS's similarly managed
accounts, for inclusion in the Fund's Prospectus and any other reports and
materials prepared by the Fund or its agent, in accordance with regulatory
requirements; (iv) establish appropriate personal contacts with ALIAC in order
to provide ALIAC with information reasonably requested by ALIAC; and (v)
execute account documentation, agreements, contracts and other documents as
ALIAC shall be requested by brokers, dealers, counterparties and other persons
to execute in connection with its management of the assets of the MFS
Portfolios, provided that MFS receives the express agreement and consent of
ALIAC and/or the Fund's Board of Directors to execute such documentation,
agreements, contracts and other documents. In such respect, and only for this
limited purpose, MFS shall act as the adviser and/or the MFS Portfolios' agent
and attorney-in-fact. Any investment program undertaken by MFS pursuant to the
agreements to which they are a party, as well as any other activities
undertaken by the MFS at the direction of ALIAC, on behalf of the MFS
Portfolios, shall at all times be subject to any directives of the Fund's Board
of Directors.
Under the New MFS Agreement, MFS shall perform compliance testing with
respect to the MFS Portfolios, based upon information in its possession, and
upon written instructions received from ALIAC.
The New MFS Agreement provides that in selecting broker-dealers qualified
to execute a particular equity transaction, brokers or dealers may be selected
who also provide brokerage or research services (as those terms are defined in
Section 28(e) of the Exchange Act) to MFS and/or the other accounts over which
MFS or its affiliates exercise investment discretion. MFS is authorized to pay
a broker or dealer that provides such brokerage or research services a
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<PAGE>
commission for executing a portfolio transaction for the MFS Portfolio(s) that
is in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if MFS determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer and is paid in
compliance with Section 28(e).
MFS is obligated under the New MFS Agreement to pay the salaries,
employment benefits and other related costs of personnel engaged in providing
investment advice to the MFS Portfolios, as well as the administrative expenses
incurred, including bookkeeping, clerical costs and equipment expense, in order
that it may faithfully and fully perform its obligations under the New MFS
Agreement.
MFS's services with respect to the MFS Portfolios is not deemed to be
exclusive, and MFS shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities.
The fees payable to MFS, which are paid by ALIAC and not by the MFS
Portfolios, will remain the same under the New MFS Agreement.
Like the Current MFS Agreement, the New MFS Agreement provides that
neither MFS nor any of its directors, officers, employees or agents shall be
liable to ALIAC or the Fund for any loss or expense suffered by ALIAC or the
Fund resulting from its acts or omissions as Sub-Adviser to the MFS Portfolios,
except for losses or expenses to ALIAC or the Fund resulting from willful
misconduct, bad faith, or gross negligence in the performance of, or from
reckless disregard of, MFS's duties under the New MFS Agreement. Neither MFS
nor any of its agents shall be liable to ALIAC 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 ALIAC, 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 MFS under the New
MFS Agreement.
The termination provisions of the New MFS Agreement are the same as those
of the Current MFS Agreement. The New MFS Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Fund's Board of
Directors, including a majority of its disinterested directors, by a vote of a
majority of the outstanding voting securities of such MFS Portfolio on 60 days'
prior written notice to MFS, or by ALIAC (i) on at least 120 days' prior
written notice to MFS, without any payment of penalty, (ii) upon material
breach by MFS 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 MFS becomes unable to discharge its duties and obligations under
the New MFS Agreement. MFS may terminate the New MFS Agreement at any time,
without the payment of any penalty, on at least 90 days' prior notice to ALIAC.
The New MFS Agreement shall terminate automatically in the event of its
assignment or upon termination of the Investment Advisory Agreement between the
Fund and ALIAC.
For more details regarding the New MFS Agreement, please see Exhibit 2.
14
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INFORMATION ABOUT MFS
MFS, 500 Boylston Street, Boston, Massachusetts 02116, an investment
advisory firm incorporated in the State of Delaware in January 1972, currently
manages over $[112 billion] in retail and institutional mutual fund assets. In
addition to investment management services, MFS also provides administrative
services to tax-exempt and taxable institutional clients worldwide. Please
refer to Appendix 8 for information concerning MFS's Directors and officers,
and information regarding other MFS advised funds with a similar objective. MFS
is registered with the SEC as an investment adviser under the Advisers Act.
MFS has managed the MFS Portfolios pursuant to the Current MFS Agreement
dated August 29, 1997. The Current MFS Agreement was last approved by the Board
on February 9, 2000 and by the sole initial shareholder of each MFS Portfolio
of the Fund on September 18, 1997. For the services it provides to these MFS
Portfolios under the Current MFS Agreement, MFS receives sub-advisory fees at
the following rate, based upon the daily average value of the aggregate assets
of the MFS Portfolios: 0.40% on the first $300 million, 0.375% on the next $300
million, 0.35% on the next $300 million, 0.325% on the next $600 million and
0.25% on assets over $1.5 billion. This fee will not change under the New MFS
Agreement. For the fiscal year ended December 31, 1999, the sub-advisory fees
paid to MFS by ALIAC were as follows: MFS Capital Opportunities, $446,631; MFS
Emerging Equities, $6,282,714; and MFS Research Growth, $5,423,591.
From time to time, MFS may receive brokerage and research services from
brokers that execute securities transactions for the MFS Portfolios. The
commission paid by these MFS Portfolios to a broker that provides such services
to MFS may be greater than the commission would be if an MFS Portfolio used a
broker that does not provide the same level of brokerage and research services.
Additionally, MFS may use such services for clients other than the MFS
Portfolios. During their most recent fiscal year ended December 31, 1999, the
Portfolios had not effected any brokerage transactions in portfolio securities
with ALIAC, MFS or any other affiliated person of either entity.
EVALUATION BY THE BOARD OF DIRECTORS
In determining whether or not it was appropriate to approve the New MFS
Agreement and to recommend approval to shareholders, the Fund's Board of
Directors, including the Independent Directors, considered, among other things,
the fact that the MFS Portfolios will continue to be managed by MFS, the
current Sub-Adviser, that the compensation to be received by MFS under the New
MFS Agreement is the same as the compensation paid to MFS under the Current MFS
Agreement, and that the Transaction is not expected to have any affect on
services rendered by MFS. Further, the Fund's Board of Directors considered (1)
the nature and quality of the services rendered by MFS under the Current MFS
Agreement; (2) the fairness of the compensation payable to MFS under the New
MFS Agreement; (3) the performance results achieved by MFS for the MFS
Portfolios; and (4) the personnel, operations and financial condition, and
investment management capabilities, methodologies, and performance of MFS. The
Independent Directors were advised by independent legal counsel with respect to
these matters.
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<PAGE>
Based upon its review, the Fund's Board of Directors determined that, by
approving the New MFS Agreement, the MFS Portfolios can best be assured that
services from MFS will be provided without interruption. The Fund's Board of
Directors believes that retaining MFS is in the best interests of the MFS
Portfolios and their shareholders. Accordingly, after consideration of the
above factors, and such other factors and information it considered relevant,
the Fund's Board of Directors unanimously approved the New MFS Agreement and
voted to recommend its approval by each MFS Portfolio's shareholders.
The effectiveness of this Proposal No. 2 is conditioned on the
consummation of the Transaction. Accordingly, in the event that the Transaction
is not consummated, MFS will continue to manage the MFS Portfolios pursuant to
the Current MFS Agreement. If the shareholders of any of the above-named MFS
Portfolios should fail to approve the New MFS Agreement, the Fund's Board of
Directors shall meet to consider appropriate action for that MFS Portfolio.
VOTE REQUIRED
Shareholders of each of the above-named MFS Portfolios must approve the
New MFS Agreement. Approval of this Proposal No. 2 by an MFS Portfolio requires
an affirmative vote of the lesser of (i) 67% or more of each MFS Portfolio's
shares present at the Special Meeting if more than 50% of the outstanding
shares of each MFS Portfolio are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of each MFS Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL
NO. 2.
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PROPOSAL NO. 3
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Shareholders of the Scudder International Growth Portfolio of the Fund
(the "Scudder Portfolio") are being asked to approve a new Sub-Advisory
Agreement between ALIAC and Scudder Kemper Investments, Inc. ("Scudder"), on
behalf of the Scudder Portfolio. SHAREHOLDER APPROVAL OF A NEW SUB-ADVISORY
AGREEMENT FOR THE SCUDDER PORTFOLIO (THE "NEW SCUDDER AGREEMENT") IS BEING
SOUGHT SO THAT THE MANAGEMENT OF THE SCUDDER PORTFOLIO CAN CONTINUE
UNINTERRUPTED AFTER THE TRANSACTION, BECAUSE THE CURRENT SUB-ADVISORY AGREEMENT
WITH SCUDDER (THE "CURRENT SCUDDER AGREEMENT") FOR THE SCUDDER PORTFOLIO MAY
TERMINATE AUTOMATICALLY AS A RESULT OF THE TRANSACTION. A form of the New
Scudder Agreement is attached as Exhibit 3 to this Proxy Statement and the
description of its terms in this section is qualified in its entirety by
reference to Exhibit 3.
While the Board of Directors of the Fund is seeking shareholder approval
of a New Scudder Agreement, such Agreement does not restrict the Board's
ability to terminate or replace the Sub-Adviser for the Scudder Portfolio at
any time in the future, subject to any shareholder approval that may be
required. In addition, if the adoption of the "Manager-of-Managers"
arrangement, as discussed below under Proposal No. 5, is adopted by the Scudder
Portfolio, the Board of Directors can terminate or replace Scudder with respect
to the Scudder Portfolio without further shareholder approval.
The New Scudder Agreement must be voted upon by shareholders of the
Scudder Portfolio. If the New Scudder Agreement is approved by shareholders of
the Scudder Portfolio, then the New Scudder Agreement will take effect
immediately after the closing of the Transaction. The New Scudder Agreement
will remain in effect for two years from the date it takes effect, and, unless
earlier terminated, will continue in effect from year to year thereafter,
provided that each such continuance is approved at least annually by the Fund's
Board of Directors, including a majority of the Fund's Directors who are not
parties to the New Scudder Agreement or "interested persons" of any such party
(other than as Directors of the Fund).
At the September 14, 2000 meeting of the Fund's Board of Directors, the
New Scudder Agreement was approved unanimously by the Fund's Board of
Directors, including all of the Directors who are not interested parties to the
New Scudder Agreement or interested persons of such parties.
TERMS OF THE NEW SCUDDER AGREEMENT
The terms of the New Scudder Agreement will be the same in all material
respects as those of the Current Scudder Agreement, except for the effective
date and the manner in which the Agreement shall be continued. The New Scudder
Agreement, like the Current Scudder Agreement, requires Scudder, under the
supervision of ALIAC and subject to the approval and direction of the Fund's
Board of Directors, to manage the Scudder Portfolio's assets.
17
<PAGE>
The New Scudder Agreement states that Scudder shall regularly provide
investment advice with respect to the assets held by the Scudder Portfolio, and
shall be authorized to (a) buy, sell, exchange, convert, lend or otherwise
trade in any stocks, bonds, and other securities or assets on behalf of the
Scudder Portfolio, and (b) directly or through the trading desks of Scudder 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 Scudder may select. In carrying
out these duties, Scudder is required to: (i) regularly (but no less frequently
than quarterly) report to the Fund's Board of Directors and to ALIAC with
respect to the implementation of the investment program and, in addition,
provide such statistical information and special reports concerning the Scudder
Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Scudder Portfolio, as may
reasonably be requested by the Fund's Board of Directors or ALIAC and agreed to
by Scudder, including attendance at Board meetings, as reasonably requested, to
present such information and reports to the Fund's Board of Directors; (ii)
consult with the Fund'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 Investment Company Act
and for which market quotations are not readily available; (iii) provide any
and all information, records and supporting documentation about the accounts
Scudder manages that have investment objectives, policies, and strategies
substantially similar to those employed by Scudder in managing the Scudder
Portfolio which may be reasonably necessary, under applicable laws, to allow
the Fund or its agent to present historical performance information concerning
Scudder's similarly managed accounts, for inclusion in the Fund's Prospectus
and any other reports and materials prepared by the Fund or its agents, in
accordance with regulatory requirements; (iv) establish appropriate personal
contacts with ALIAC in order to provide ALIAC with information reasonably
requested by ALIAC; and (v) execute account documentation, agreements,
contracts and other documents as ALIAC shall be requested by brokers, dealers,
counterparties and other persons to execute in connection with its management
of the assets of the Scudder Portfolio, provided that Scudder receives the
express agreement and consent of ALIAC and/or the Fund's Board of Directors to
execute such documentation, agreements, contracts and other documents. In such
respect, and only for this limited purpose, Scudder shall act as the adviser
and/or the Scudder Portfolio's agent and attorney-in-fact. Any investment
program undertaken by Scudder pursuant to the agreements to which they are a
party, as well as any other activities undertaken by Scudder at the direction
of ALIAC, on behalf of the Scudder Portfolio, shall at all times be subject to
any directives of the Fund's Board of Directors.
Under the New Scudder Agreement, Scudder shall perform compliance testing
with respect to the Scudder Portfolio, based upon information in its
possession, and upon written instructions received from ALIAC.
The New Scudder Agreement provides that in selecting broker-dealers
qualified to execute a particular equity transaction, brokers or dealers may be
selected who also provide brokerage or research services (as those terms are
defined in Section 28(e) of the Exchange Act) to Scudder and/or the other
accounts over which Scudder or its affiliates exercise investment discretion.
Scudder is authorized to pay a broker or dealer that provides such brokerage or
research services a commission for executing a portfolio transaction for the
Scudder Portfolio that is in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction if Scudder
determines in good faith that such amount of commission is
18
<PAGE>
reasonable in relation to the value of the brokerage or research services
provided by such broker or dealer and is paid in compliance with Section 28(e).
Scudder is obligated under the New Scudder Agreement to pay the salaries,
employment benefits and other related costs of personnel engaged in providing
investment advice to the Scudder Portfolio, as well as the administrative
expenses incurred, including bookkeeping, clerical costs and equipment expense,
in order that it may faithfully and fully perform its obligations under the New
Scudder Agreement.
Scudder's services with respect to the Scudder Portfolio are not deemed to
be exclusive, and Scudder shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities.
The fees payable to Scudder, which are paid by ALIAC and not by the
Scudder Portfolio, will remain the same under the New Scudder Agreement.
Like the Current Scudder Agreement, the New Scudder Agreement provides
that neither Scudder nor any of its directors, officers, employees or agents
shall be liable to ALIAC or the Fund for any loss or expense suffered by ALIAC
or the Fund resulting from its acts or omissions as Sub-Adviser to the Scudder
Portfolio, except for losses or expenses to ALIAC or the Fund resulting from
willful misconduct, bad faith, or gross negligence in the performance of, or
from reckless disregard of, Scudder's duties under the New Scudder Agreement.
Neither Scudder nor any of its agents shall be liable to the ALIAC 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
ALIAC, 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
under the New Scudder Agreement.
The termination provisions of the New Scudder Agreement are the same as
those of the Current Scudder Agreement. The New Scudder Agreement may be
terminated at any time, without the payment of any penalty, by vote of the
Fund's Board of Directors, including a majority of its disinterested 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; or by ALIAC (i) on at
least 60 days' prior written notice to Scudder, without any payment of penalty,
(ii) upon material breach by Scudder 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 becomes unable to discharge
its duties and obligations under the New Scudder Agreement. Scudder may
terminate the New Scudder Agreement at any time, without the payment of any
penalty, on at least 60 days' prior notice to ALIAC. The New Scudder Agreement
shall terminate automatically in the event of its assignment or upon
termination of the Investment Advisory Agreement between the Fund and ALIAC.
For more details regarding the New Scudder Agreement, please see Exhibit
3.
INFORMATION ABOUT SCUDDER
Scudder, 345 Park Avenue, New York, NY 10154, an investment advisory firm
incorporated in the State of Delaware in October 1984, currently manages over
$[290 billion] in
19
<PAGE>
assets, [36%] of which are in mutual fund accounts. Please refer to Appendix 9
for information concerning Scudder's Directors and officers, and information
regarding other Scudder advised funds with a similar objective. Scudder is
registered with the SEC as an investment adviser.
Scudder has managed the Scudder Portfolio pursuant to the Current Scudder
Agreement dated September 8, 1998. The Current Scudder Agreement was last
approved by the Fund's Board of Directors on February 9, 2000 and by the
shareholders of the Scudder Portfolio on November 20, 1998, due to a
transaction similar to the Transaction involving ING. For the services it
provides to the Scudder Portfolio under the Current Scudder Agreement, Scudder
receives sub-advisory fees at the following rate, based on the daily average
value of the Scudder Portfolio's assets: 0.75% on the first $20 million, 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. This fee will not change under
the New Scudder Agreement. For the fiscal year ended December 31, 1999, ALIAC
paid to Scudder $1,978,275 in sub-advisory fees.
From time to time, Scudder receives brokerage and research services from
brokers that execute securities transactions for the Scudder Portfolio. The
commission paid by the Scudder Portfolio to a broker that provides such
services to Scudder may be greater than the commission would be if the Scudder
Portfolio used a broker that does not provide the same level of brokerage and
research services. Additionally, Scudder may use such services for clients
other than the Scudder Portfolio. During its most recent fiscal year ended
December 31, 1999, the Scudder Portfolio had not effected any brokerage
transactions in portfolio securities with ALIAC, Scudder or any other
affiliated person of either entity.
EVALUATION BY THE BOARD OF DIRECTORS
In determining whether or not it was appropriate to approve the New
Scudder Agreement and to recommend approval to the shareholders, the Fund's
Board of Directors, including the Independent Directors, considered, among
other things, the fact that the Scudder Portfolio will continue to be managed
by Scudder, the current Sub-Adviser, that the compensation to be received by
Scudder under the New Scudder Agreement is the same as the compensation paid to
Scudder under the Current Scudder Agreement, and that the Transaction is not
expected to have any affect on services rendered by Scudder. Further, the
Fund's Board of Directors considered (1) the nature and quality of the services
rendered by Scudder under the Current Scudder Agreement; (2) the fairness of
the compensation payable to Scudder under the New Scudder Agreement; (3) the
performance results achieved by Scudder for the Scudder Portfolio; and (4) the
personnel, operations and financial condition, and investment management
capabilities, methodologies, and performance of Scudder. The Independent
Directors were advised by independent legal counsel with respect to these
matters.
Based upon its review, the Fund's Board of Directors has determined that,
by approving the New Scudder Agreement, the Scudder Portfolio can best be
assured that services from Scudder will be provided without interruption. The
Fund's Board of Directors believes that retaining Scudder is in the best
interests of the Scudder Portfolio and its shareholders. Accordingly, after
consideration of the above factors, and such other factors and information it
considered relevant, the Fund's Board of Directors unanimously approved the New
Scudder Agreement and voted to recommend its approval by the Scudder
Portfolio's shareholders.
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<PAGE>
The effectiveness of this Proposal No. 3 is conditioned on the
consummation of the Transaction. Accordingly, in the event that the Transaction
is not consummated, Scudder will continue to manage the Scudder Portfolio
pursuant to the Current Scudder Agreement. If the shareholders of the Scudder
Portfolio should fail to approve the New Scudder Agreement, the Fund's Board of
Directors shall meet to consider appropriate action.
VOTE REQUIRED
Approval of this Proposal No. 3 by the Scudder Portfolio shareholders
requires an affirmative vote of the lesser of (i) 67% or more of the Scudder
Portfolio's shares present at the Special Meeting if more than 50% of the
outstanding shares of the Scudder Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding shares of the Scudder
Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL
NO. 3.
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<PAGE>
PROPOSAL NO. 4
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT FOR
T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Shareholders of T. Rowe Price Growth Equity Portfolio of the Fund (the "T.
Rowe Price Portfolio") are being asked to approve a new Sub-Advisory Agreement
between ALIAC and T. Rowe Price Associates, Inc. ("T. Rowe Price") on behalf of
the T. Rowe Price Portfolio. Shareholder approval of a new Sub-Advisory
Agreement for the T. Rowe Price Portfolio (the "New T. Rowe Price Agreement")
is being sought so that the management of the T. Rowe Price Portfolio can
continue uninterrupted after the Transaction, because the current Sub-Advisory
Agreement (the "Current T. Rowe Price Agreement") for the T. Rowe Price
Portfolio may terminate automatically as a result of the Transaction. A form of
the New T. Rowe Price Agreement is attached as Exhibit 4 to this Proxy
Statement and the description of its terms in this section is qualified in its
entirety by reference to Exhibit 4.
While the Board of Directors of the Fund is seeking shareholder approval
of a New T. Rowe Price Agreement, such Agreement does not restrict the Board's
ability to terminate or replace the Sub-Adviser for the T. Rowe Price Portfolio
at any time in the future, subject to any shareholder approval that may be
required. In addition, if the adoption of the "Manager-of-Managers"
arrangement, as discussed below under Proposal No. 5, is adopted by the T. Rowe
Price Portfolio, the Board of Directors can terminate or replace T. Rowe Price
with respect to the T. Rowe price Portfolio without further shareholder
approval.
The New T. Rowe Price Agreement must be voted upon separately by
shareholders of the T. Rowe Price Portfolio. If the New T. Rowe Price Agreement
is approved by shareholders of the T. Rowe Price Portfolio, then the New T.
Rowe Price Agreement will take effect immediately after the closing of the
Transaction. The New T. Rowe Price Agreement will remain in effect for two
years from the date it takes effect, and, unless earlier terminated, will
continue in effect from year to year thereafter, provided that each such
continuance is approved at least annually by the Fund's Board of Directors,
including a majority of the Fund's Directors who are not parties to the New T.
Rowe Price Agreement or "interested persons" of any such party (other than as
Directors of the Fund).
At the September 14, 2000 meeting of the Fund's Board of Directors, the
New T. Rowe Price Agreement was approved unanimously by the Fund's Board of
Directors, including all of the Directors who are not interested parties to the
New T. Rowe Price Agreement or interested persons of such parties.
TERMS OF THE NEW T. ROWE PRICE AGREEMENT
The terms of the New T. Rowe Price Agreement will be the same in all
material respects as those of the Current T. Rowe Price Agreement except for
the effective date, and the manner in which the New T. Rowe Price Agreement may
be continued. The New T. Rowe Price Agreement, like the Current T. Rowe Price
Agreement, requires T. Rowe Price, under the supervision of ALIAC and subject
to the approval and direction of the Fund's Board of Directors, to manage the
T. Rowe Price Portfolio's assets.
22
<PAGE>
The New T. Rowe Price Agreement states that T. Rowe Price shall regularly
provide investment advice with respect to the assets held by the T. Rowe Price
Portfolio, and shall be authorized to (a) buy, sell, exchange, convert, lend or
otherwise trade in any stocks, bonds, and other securities or assets on behalf
of the T. Rowe Price Portfolio, and (b) directly or through the trading desks
of T. Rowe Price 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 T. Rowe Price may select. In
carrying out these duties, T. Rowe Price is required to: (i) regularly (but no
less frequently than quarterly) report to the Fund's Board of Directors and
ALIAC with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the T. Rowe Price Portfolio and/or important developments materially affecting
the investments held, or contemplated to be purchased, by the T. Rowe Price
Portfolio, as may reasonably be requested by the Fund's Board of Directors or
ALIAC and agreed to by T. Rowe Price, including attendance at Board meetings,
as reasonably requested, to present such information and reports to the Fund's
Board of Directors; (ii) consult with the Fund'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
Investment Company Act and for which market quotations are not readily
available; (iii) establish appropriate personal contacts with ALIAC in order to
provide ALIAC with information as reasonably requested by ALIAC; and (iv)
execute account documentation, agreements, contracts and other documents as
ALIAC shall be requested by brokers, dealers, counterparties and other persons
to execute in connection with its management of the assets of the T. Rowe Price
Portfolio, provided that T. Rowe Price receives the express agreement and
consent of ALIAC and/or the Fund's Board of Directors to execute such
documentation, agreements, contracts and other documents. In such respect, and
only for this limited purpose, T. Rowe Price shall act as the adviser and/or
the T. Rowe Price Portfolio's agent and attorney-in-fact. Any investment
program undertaken by T. Rowe Price pursuant to the agreements to which it is a
party, as well as any other activities undertaken by T. Rowe Price at the
direction of ALIAC, on behalf of the T. Rowe Price Portfolio, shall at all
times be subject to any directives of the Fund's Board of Directors.
Under the New T. Rowe Price Agreement, T. Rowe Price shall perform
compliance testing with respect to the T. Rowe Price Portfolio, based upon
information in its possession, and upon written instructions received from
ALIAC. The New T. Rowe Price Agreement provides that in selecting
broker-dealers qualified to execute a particular equity transaction, brokers or
dealers may be selected who also provide brokerage or research services (as
those terms are defined in Section 28(e) of the Exchange Act) to the
Sub-Adviser and/or the other accounts over which T. Rowe Price or its
affiliates exercise investment discretion. T. Rowe Price is authorized to pay a
broker or dealer that provides such brokerage or research services a commission
for executing a portfolio transaction for the T. Rowe Price Portfolio that is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if T. Rowe Price determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage or research services provided by such broker or dealer and is
paid in compliance with Section 28(e).
T. Rowe Price is obligated under the New T. Rowe Price Agreement to pay
the salaries, employment benefits and other related costs of personnel engaged
in providing investment
23
<PAGE>
advice to the T. Rowe Price Portfolio, as well as the administrative expenses
incurred, including bookkeeping, clerical costs and equipment expense, in order
that it may faithfully and fully perform its obligations under the New T. Rowe
Price Agreement.
T. Rowe Price's services with respect to the T. Rowe Price Portfolio are
not to be deemed to be exclusive, and T. Rowe Price shall be free to render
investment advisory and administrative or other services to others (including
other investment companies) and to engage in other activities.
The fees payable to T. Rowe Price, which are paid by ALIAC and not by the
T. Rowe Price Portfolio, will remain the same under the New T. Rowe Price
Agreement.
Like the Current T. Rowe Price Agreement, the New T. Rowe Price Agreement
provides that neither T. Rowe Price nor any of its directors, officers,
employees or agents shall be liable to ALIAC or the Fund for any loss or
expense suffered by ALIAC or the Fund resulting from its acts or omissions as
Sub-Adviser to the T. Rowe Price Portfolio, except for losses or expenses to
ALIAC or the Fund resulting from willful misconduct, bad faith, or gross
negligence in the performance of, or from reckless disregard of, T. Rowe
Price's duties under the New T. Rowe Price Agreement. Neither T. Rowe Price nor
any of its agents shall be liable to ALIAC 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 ALIAC, 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 T. Rowe Price under the New T.
Rowe Price Agreement.
The termination provisions of the New T. Rowe Price Agreement are the same
as those of the Current T. Rowe Price Agreement. The New T. Rowe Price
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the Fund's Board of Directors, including a majority of its
disinterested directors, or by vote of a majority of the outstanding voting
securities of the T. Rowe Price Portfolio on 60 days' prior written notice to
T. Rowe Price; or by ALIAC (i) on at least 120 days' prior written notice to T.
Rowe Price, without any payment of penalty, (ii) upon material breach by T.
Rowe Price 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 T. Rowe Price becomes unable to discharge its duties and obligations
under the New T. Rowe Price Agreement. T. Rowe Price may terminate the New T.
Rowe Price Agreement at any time, without the payment of any penalty, on at
least 90 days' prior notice to ALIAC. The New T. Rowe Price Agreement shall
terminate automatically in the event of its assignment or upon termination of
the Investment Advisory Agreement between the Fund and ALIAC.
For more details regarding the New T. Rowe Price Agreement, please see
Exhibit 4.
INFORMATION ABOUT T. ROWE PRICE
T. Rowe Price, 100 East Pratt Street, Baltimore Maryland, 21202, an
independent investment advisory firm, was established in 1937, incorporated in
Maryland in 1946, and registered with the SEC as an investment adviser in 1947.
The corporation and its affiliates
24
<PAGE>
currently manage over $[157 billion] in individual and institutional accounts,
[$102 billion] of which are managed in mutual funds. Please refer to Appendix
10 for information concerning T. Rowe Price's Directors and officers, and
information regarding other T. Rowe Price advised funds with a similar
objective.
T. Rowe Price has managed the T. Rowe Price Portfolio pursuant to the
Current T. Rowe Price Agreement dated October 28, 1997. The Current T. Rowe
Price Agreement was last approved by the Fund's Board of Directors on February
9, 2000 and by the initial shareholders of the Portfolio on September 18, 1997.
For the services it provides to the T. Rowe Price Portfolio under the Current
T. Rowe Price Agreement, T. Rowe Price receives sub-advisory fees at the
following rate, based on the daily average value of the T. Rowe Price
Portfolio's assets: 0.40% on the first $500 million, and 0.375% on assets over
$500 million. This fee will not change under the New T. Rowe Price Agreement.
For the fiscal year ended December 31, 1999, ALIAC paid to T. Rowe Price
$2,508,647 in sub-advisory fees.
From time to time, T. Rowe Price receives brokerage and research services
from brokers that execute securities transactions for the T. Rowe Price
Portfolio. The commission paid by the T. Rowe Price Portfolio to a broker that
provides such services to T. Rowe Price may be greater than the commission
would be if the T. Rowe Price Portfolio used a broker that does not provide the
same level of brokerage and research services. Additionally, T. Rowe Price may
use such services for clients other than the T. Rowe Price Portfolio. During
the Fund's most recent fiscal year ended December 31, 1999, The T. Rowe Price
Portfolio had not effected any brokerage transactions in portfolio securities
with ALIAC, T. Rowe Price, or any other affiliated person of either entity.
EVALUATION BY THE BOARD OF DIRECTORS
In determining whether or not it was appropriate to approve the New T.
Rowe Price Agreement for the T. Rowe Price Portfolio and to recommend approval
to the shareholders, the Fund's Board of Directors, including the Independent
Directors, considered, among other things, the fact that the T. Rowe Price
Portfolio will continue to be managed by T. Rowe Price, the current
Sub-Adviser, that the compensation to be received by T. Rowe Price under the
New T. Rowe Price Agreement is the same as the compensation paid to T. Rowe
Price under the Current T. Rowe Price Agreement, and that the Transaction is
not expected to have any affect on services rendered by T. Rowe Price. Further,
the Fund's Board of Directors considered (1) the nature and quality of the
services rendered by T. Rowe Price under the Current T. Rowe Price Agreement;
(2) the fairness of the compensation payable to T. Rowe Price under the New T.
Rowe Price Agreement; (3) the performance results achieved by T. Rowe Price for
the T. Rowe Price Portfolio; and (4) the personnel, operations and financial
condition, and investment management capabilities, methodologies, and
performance of T. Rowe Price. The Independent Directors were advised by
independent legal counsel with respect to these matters.
Based upon its review, the Fund's Board of Directors has determined that,
by approving the New T. Rowe Price Agreement, the T. Rowe Price Portfolio can
best be assured that services from T. Rowe Price will be provided without
interruption. The Fund's Board of Directors believes that retaining T. Rowe
Price is in the best interests of the T. Rowe Price Portfolio and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and
25
<PAGE>
information it considered relevant, the Fund's Board of Directors unanimously
approved the New T. Rowe Price Agreement and voted to recommend its approval by
the T. Rowe Price Portfolio's shareholders.
The effectiveness of this Proposal No. 4 is conditioned on the
consummation of the Transaction. Accordingly, in the event that the Transaction
is not consummated, T. Rowe Price will continue to manage the T. Rowe Price
Portfolio pursuant to the Current T. Rowe Price Agreement. If the shareholders
of the T. Rowe Price Portfolio should fail to approve the New T. Rowe Price
Agreement, the Board shall meet to consider appropriate action.
VOTE REQUIRED
Approval of this Proposal No. 4 by the T. Rowe Price Portfolio
shareholders requires an affirmative vote of the lesser of (i) 67% or more of
the T. Rowe Price Portfolio's shares present at the Special Meeting if more
than 50% of the outstanding shares of the T. Rowe Price Portfolio are present
or represented by proxy, or (ii) more than 50% of the outstanding shares of the
T. Rowe Price Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL
NO. 4.
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<PAGE>
PROPOSAL NO. 5
APPROVAL OF A "MANAGER-OF-MANAGERS" ARRANGEMENT
FOR THE FUND
Shareholders of each Portfolio are being asked to approve a new
"Manager-of-Managers" arrangement permitting ALIAC, as adviser to each
Portfolio and the Fund, to enter into Sub-Advisory Agreements (each a
"Sub-Advisory Agreement") with investment management organizations (each a
"Sub-Adviser"), or to materially modify an existing Sub-Advisory Agreement,
without such Sub-Advisory Agreement being approved by the shareholders of the
applicable Portfolio. Under these circumstances, ALIAC would act as a
"Manager-of-Managers."
At a meeting of the Board held on September 14, 2000, the Fund's Board of
Directors, including a majority of Independent Directors, voted to approve the
submission of a "Manager-of-Managers" arrangement to shareholders of the
Portfolios.
CURRENT INVESTMENT ADVISORY AGREEMENT
Under the Fund's Current Advisory Agreement, the investment adviser,
ALIAC, provides investment advisory services to each Portfolio, including, but
not limited to, economic research and securities analyses, investing, reporting
and supervision, and formulation and implementation of an investment program
for each Portfolio consistent with that Portfolio's investment objectives and
policies. The Current Agreement authorizes ALIAC to delegate a number of these
duties to one or more sub-advisers for the Portfolios. Subject to the approval
of the Fund's Board of Directors and of the shareholders of the respective
Portfolio, ALIAC may enter into sub-advisory agreements to engage one or more
sub-advisers with respect to the Portfolios. In its capacity as adviser, ALIAC
monitors the investment program of each sub-adviser, reviews all data and
financial reports prepared by each sub-adviser, establishes and maintains
communications with each sub-adviser, and oversees all matters relating to the
purchase and sale of investment securities, corporate governance, third party
contracts and regulatory compliance reports. However, Section 15(a) of the
Investment Company Act requires that a majority of the outstanding shares of a
Portfolio approve all written investment advisory contracts. Consequently, any
recommendations concerning the appointment of a new sub-adviser or material
modification of a sub-advisory agreement made by ALIAC and approved by the
Fund's Board of Directors must be presented for approval to the particular
Portfolio's shareholders in a special meeting of the shareholders called for
that purpose.
PROPOSED MANAGER-OF-MANAGERS ARRANGEMENT
On June 30, 2000, ALIAC and the Fund filed with the Securities and
Exchange Commission (the "SEC") an application (the "Application") seeking,
among other relief, an exemption from Section 15(a) (and certain other
provisions of the Investment Company Act). If granted, the relief would permit
ALIAC, with the approval of the Fund's Board of Directors, to enter into,
modify or terminate sub-advisory agreements without requiring shareholder
approval. The Fund will continue to obtain shareholder approval of a
sub-advisory agreement with a sub-adviser considered to be an "affiliated
person" (as defined in the Investment Company Act), of
27
<PAGE>
the Fund or ALIAC, other than by reason of serving as a sub-adviser to one or
more of the Portfolios ("Affiliated Sub-Adviser"). In addition, the Board of
Directors of the Fund and ALIAC would not be able to materially amend the New
Advisory Agreement without complying with the Investment Company Act and
applicable regulations governing shareholder approval of advisory agreements.
The Manager-of-Managers arrangement will enable the Fund to operate with
greater efficiency by allowing ALIAC to employ sub-advisers best suited to the
needs of the Portfolios, without incurring the expense and delays associated
with obtaining Shareholder approval of sub-advisers or sub-advisory agreements.
If shareholders of the Portfolios approve the Manager-of-Managers arrangement,
the Portfolios will enter into a new Investment Advisory Agreement (the "New
Advisory Agreement"), as more particularly described in Proposal No. 1, with
ALIAC, which will be approved by the Portfolios' shareholders, and which will
authorize ALIAC to: (1) set a Portfolio's overall investment strategies, (2)
recommend and select one or more sub-advisers for each Portfolio, (3) allocate
a Portfolio's assets among different sub-advisers as deemed appropriate, (4)
monitor and evaluate the performance of a Portfolio's sub-advisers, (5)
recommend to the Fund's Board of Directors whether a sub-advisory agreement
should be approved, renewed, modified or terminated, and (6) implement
procedures to ensure that a sub-adviser complies with a Portfolio's investment
objective, policies and restrictions. Under the New Advisory Agreement, any of
the above actions reserved by ALIAC would be reviewed and approved by the
Fund's Board of Directors, including a majority of the Independent Directors,
before implementation.
CURRENT STATUS OF THE APPLICATION
The Application is currently under review by the SEC. Although it is not
yet known whether the SEC will grant the requested relief, it is anticipated
that one of the SEC's conditions for approving such relief as to each Portfolio
will be the approval of the proposed arrangements by a majority of the
outstanding voting securities of each Portfolio. Because the Transaction
between Aetna and ING required the Fund's Board of Directors to call the
special meeting of the Fund's shareholders to seek approval of the New Advisory
Agreement (Proposal No. 1, presented on page [ ] of this proxy statement), the
Fund's Board of Directors is taking this opportunity to seek shareholder
approval of the proposed Manager-of-Managers arrangement as well. If
shareholders of the Portfolios approve the proposal and the SEC grants the
requested relief, it is anticipated that the Portfolios and ALIAC will be
required to comply with certain conditions, as outlined in the Application, if
the arrangement is to go into effect. Several of these conditions address the
need for disclosure when a new sub-adviser is appointed, or a material change
to a sub-advisory agreement is made, to ensure that the appropriate Portfolio's
shareholders are notified of the changes in a timely manner. These
notifications of changes will be similar in content to the information that
would have been presented to shareholders in a proxy statement, had the Fund
been required to call a special meeting of shareholders. Such disclosure will
ensure that Fund shareholders are apprised of changes that impact their
Portfolio.
EVALUATION BY THE BOARD OF DIRECTORS
In determining whether or not it was appropriate to approve the
Manager-of-Managers arrangement and to recommend approval to shareholders, the
Fund's Board of Directors,
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including the Independent Directors, considered certain information and
representations provided by ALIAC. Further, the Independent Directors were
advised by independent legal counsel with respect to these matters.
The Fund's Board of Directors initially met on February 9, 2000 to review
and consider, among other things, information relating to the
Manager-of-Managers arrangement. At that time, the Fund's Board of Directors
authorized the submission of the Application to the SEC. On September 14, 2000
the Fund's Board of Directors voted to submit this proposal to shareholders of
each Portfolio. The Fund's Board of Directors believes that allowing ALIAC to
hire new sub-advisers or negotiate sub-advisory agreements for the Portfolios
without incurring the expenses or delays of obtaining shareholder approval is
in the best interests of each Portfolio's shareholders, and will allow the
Portfolios to operate more efficiently. Currently, in order for ALIAC to
appoint a new sub-adviser or materially modify a sub-advisory agreement, a
Portfolio must solicit votes and hold a special meeting of its shareholders. If
ALIAC could appoint new sub-advisers or materially modify sub-advisory
agreements without having to hold special shareholder meetings, the Fund's
Board of Directors would be able to act more quickly and with less expense to
appoint a new sub-adviser when the Board and ALIAC believe that the appointment
would benefit a Portfolio and its shareholders.
Moreover, the Fund's Board of Directors will continue to provide oversight
of ALIAC's sub-adviser selection process to ensure that shareholders' interests
are protected when ALIAC selects a new sub-adviser or modifies a sub-advisory
agreement for any Portfolio. The Fund's Board of Directors, including a
majority of the Independent Directors, will evaluate and approve all new
sub-advisory agreements as well as any modifications to all sub-advisory
agreements entered into by ALIAC on behalf of a Portfolio. In performing this
oversight function, the Fund's Board of Directors will analyze all factors that
it considers to be relevant to the evaluation including, but not limited to,
the services and expertise provided by the Sub-Advisers, and the oversight
functions maintained by ALIAC. The Fund's Board of Directors believes that its
review will ensure that ALIAC continues to act in the best interests of the
Portfolios and their shareholders. Accordingly, after consideration of the
above factors, and such other factors and information it considered relevant,
the Fund's Board of Directors unanimously approved the Manager-of-Managers
arrangement, and voted to recommend its approval by shareholders.
Implementation of the arrangement is contingent upon shareholder approval
of the arrangement and receipt of the requested exemptive relief from the SEC.
If the SEC declines to grant relief under the Application, the Portfolios will
not implement the Manager-of-Managers arrangement.
VOTE REQUIRED
Shareholders of each Portfolio must approve the Manager-of-Managers
arrangement for that Portfolio. Approval of this Proposal No. 5 by a Portfolio
shareholders requires an affirmative vote of the lesser of (i) 67% or more of
each Portfolio's shares present at the Special Meeting if more than 50% of the
outstanding shares of each Portfolio are present or represented by proxy, or
(ii) more than 50% of the outstanding shares of each Portfolio. If a particular
Portfolio does not approve the arrangement, it will not be implemented as to
that Portfolio and
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the Portfolio will continue to obtain shareholder approval of all Sub-Advisory
Agreements related to that Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL
NO. 5.
GENERAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
Management of the Fund does not know of any matters to be presented at the
Special 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.
SECTION 15(F) OF THE INVESTMENT COMPANY ACT
ING and Aetna have agreed to use their reasonable best efforts to assure
compliance with the conditions of Section 15(f) of the Investment Company Act.
Section 15(f) provides a non-exclusive safe harbor for an investment adviser or
any affiliated persons thereof to receive any amount or benefit in connection
with a transaction that results in a change in control of or identity of the
investment adviser to an investment company as long as two conditions are met.
First, no "unfair burden" may be imposed on the investment company as a result
of the transaction relating to the change in control, or any express or implied
terms, conditions or understandings applicable thereto. As defined in the
Investment Company Act, the term "unfair burden" includes any arrangement
during the two-year period after the change in control whereby the investment
adviser (or predecessor or successor adviser), or any interested person of any
such adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders (other than
fees for bona fide investment advisory or other services), or from any person
in connection with the purchase or sale of securities or other property to,
from, or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter of the investment company). Second,
during the three year period immediately following the change in control, at
least 75% of an investment company's board of directors must not be "interested
persons" of the investment adviser or the predecessor investment adviser within
the meaning of the Investment Company Act.
ALIAC serves as the Fund's Administrator. ALIAC's address is 151
Farmington Farmington Avenue, Hartford, Connecticut 06156. Aetna Investment
Services, Inc. ("AISI"), was approved at the September 14, 2000 meeting of the
Board of Directors to serve as the Fund's Underwriter. AISI's address is 151
Farmington Avenue, Hartford, Connecticut 06156.
VOTING RIGHTS
Only shareholders of record on September 8, 2000 (the "record date") are
entitled to be present and to vote at the Special Meeting or any adjourned
meeting. Appendix 1 sets forth the number of shares of each Portfolio
outstanding as of the record date.
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Other than shares purchased by ALIAC's general account in connection with
providing seed capital, shares of each Portfolio are offered only to insurance
company separate accounts that fund both annuity and life insurance contracts.
As of the record date, ALIAC and its subsidiary, Aetna Insurance Company of
America ("AICA") (collectively referred to herein as "Aetna Insurance"), owned
of record all of the shares of the Portfolios (100%). Of this amount, shares of
each Portfolio were allocated to Aetna Insurance's general account and/or held
by Aetna Insurance on behalf of the separate accounts that fund variable
annuity and variable life contracts (each a "Contract") issued to individual or
group Contract Holders ("Contract Holders") as set forth in Appendix 2. To the
best of the Fund's knowledge, as of the record date, no person owned
beneficially more than 5% of any Portfolio, except as set forth in Appendix 2.
The separate accounts invest in the Portfolios. Contract Holders (or
participants under group contracts, as applicable) who select a Portfolio for
investment through a Contract have a beneficial interest in the Portfolios, but
do not invest directly in or hold shares of the Portfolios. Aetna Insurance, on
behalf of the separate accounts, is the true shareholder of the Portfolios and,
as the legal owner of each Portfolio's shares, has sole voting and investment
power with respect to the shares, but generally will pass through any voting
rights to Contract Holders. Contract Holders therefore have the right to
instruct Aetna Insurance how to vote their interest with respect to the
Proposals. Aetna Insurance will vote the shares of each Portfolio held in Aetna
Insurance's name for the separate accounts as directed by the Contract Holder.
The holders of certain group Contracts have the right to direct the vote for
all shares under the respective Contract, for, against or abstaining, in the
same proportions as shares for which instructions have been given by
participants covered by the Contract. This Proxy Statement is used to solicit
instructions for voting shares of each Portfolio. All persons entitled to
direct the voting of shares, whether they are Contract Holders, participants or
shareholders, will be described as voting for purposes of this Proxy Statement.
In the event that any Contract Holder investing in the Portfolios through
Variable Annuity Accounts B, C, or I or Variable Life Accounts B or C fails to
provide Aetna Insurance with voting instructions, Aetna Insurance will vote the
shares attributable to those Contract Holders for, against or abstaining, in
the same proportions as the shares for which instructions have been received
from other Contract Holders investing through separate accounts. If an
authorization card is returned by a Contract Holder without indicating a voting
instruction, Aetna Insurance will vote those shares "for" the Proposals. With
respect to Portfolio shares held by Variable Annuity Account D, Aetna Insurance
will only vote those separate account shares for which it receives
instructions. Shares of the Fund owned by Aetna Insurance through the general
account will be voted in the same proportion as shares held by the separate
accounts investing in that Portfolio. Abstentions will have the effect of a
"no" vote on Proposals 1, 2, 3, 4 and 5.
The presence in person or by proxy of a Portfolio's shareholders entitled
to cast a majority in number of votes is necessary to constitute a quorum for
the transaction of business. Because Aetna Insurance is the legal owner of all
Fund shares, there will be a quorum at the Special Meeting regardless of how
Contract Holders direct Aetna Insurance to vote on the Proposals. If there are
insufficient votes to approve a Proposal, the persons named as proxies may
propose one or more adjournments of the Special Meeting to permit additional
time for the solicitation of proxies, in accordance with applicable law.
Adjourned meetings must be held within a reasonable time after the date
originally set for the meeting (but not more than 120 days
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after the record date). Solicitation of votes may continue to be made without
any obligation to provide any additional notice of the adjournment. Thepersons
named as proxies will vote in favor of such adjournment those proxies which
they are entitled to vote in favor of the Proposal and will vote against any
such adjournment those proxies to be voted against the Proposal.
The number of shares that you may vote is the total of the number shown on
the proxy card or authorization card, as applicable, accompanying this Proxy
Statement. The number of shares that you are entitled to vote is calculated
according to the formula described in the materials relating to your Contract.
Shareholders are entitled to one vote for each full share and a proportionate
vote for each fractional share held. Any shareholder giving a proxy has the
power to revoke it by mail (addressed to the Secretary at the principal
executive office of the Fund at the address shown at the beginning of this
Proxy Statement) or in person at the Special Meeting, by executing a
superseding proxy card or authorization card, as applicable, or by submitting a
notice of revocation to the Fund.
EXPENSES
ALIAC, ING, and/or one or more of their affiliates will pay the expenses
of the Fund in connection with this Notice and Proxy Statement and the Special
Meeting, including the printing, mailing, solicitation and vote tabulation
expenses, legal fees, and out of pocket expenses. The Fund will not bear the
expenses of the Proxy Statement.
ADDITIONAL PROXY SOLICITATION INFORMATION
In addition to solicitation by mail, certain officers and representatives
of the Fund, officers and employees of ALIAC and certain financial services
firms and their representatives, who will receive no extra compensation for
their services, may solicit proxies by telephone telegram or personally.
If a shareholder wishes to participate in the Special Meeting, the
shareholder may submit the proxy card(s) or authorization card(s), as
applicable, originally sent with the Proxy Statement or attend in person.
Should shareholders require additional information regarding the proxy, they
may contact Georgeson Shareholder Communications Inc. toll-free at 1-800-[ ]-[
]. Any proxy given by a shareholder is revocable until voted at the Special
Meeting.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual meetings of shareholders and
currently does not intend to hold such meetings unless shareholder action is
required in accordance with the Investment Company Act. A shareholder proposal
to be considered for inclusion in the proxy statement at any subsequent meeting
of shareholders must be submitted a reasonable time before the proxy statement
for that meeting is mailed. Whether a proposal is submitted in the proxy
statement will be determined in accordance with applicable federal and state
laws. The timely submission of a proposal does not guarantee its inclusion.
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PLEASE COMPLETE THE ENCLOSED PROXY CARD(S) OR AUTHORIZATION CARD(S), AS
APPLICABLE, AND RETURN THE CARD(S) PROMPTLY IN THE ENCLOSED SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE. You may revoke your proxy at any time prior to the
Special Meeting by written notice to ALIAC or by submitting a proxy card
bearing a later date.
By Order of the Board of Directors,
Susan C. Mosher
Secretary
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EXHIBIT 1
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT IS MADE BY AND BETWEEN AETNA LIFE INSURANCE AND ANNUITY COMPANY,
A CONNECTICUT CORPORATION (THE "ADVISER") AND PORTFOLIO PARTNERS, INC., A
MARYLAND CORPORATION (THE "COMPANY"), ON BEHALF OF EACH OF ITS SERIES, MFS
CAPITAL OPPORTUNITIES PORTFOLIO (FORMERLY MFS VALUE EQUITY PORTFOLIO), MFS
EMERGING EQUITIES PORTFOLIO, MFS RESEARCH GROWTH PORTFOLIO, SCUDDER
INTERNATIONAL GROWTH PORTFOLIO AND T. ROWE PRICE GROWTH EQUITY PORTFOLIO (THE
"SERIES"), AS OF THE DATE SET FORTH BELOW THE PARTIES' SIGNATURES.
W I T N E S S E T H
WHEREAS, the Company is registered with the Securities and Exchange Commission
(the "Commission") as an open-end, diversified, management investment company
under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Company has established the Series; and
WHEREAS, the Adviser is registered with the Commission as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), and is in the
business of acting as an investment adviser; and
WHEREAS, the Company, on behalf of the Series, and the Adviser desire to enter
into an agreement to provide for investment advisory and management services
for the Company on the terms and conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement and the policies and
control of the Company's Board of Directors (the "Board"), the Company, on
behalf of the Series, hereby appoints the Adviser to serve as its investment
adviser, to provide the investment advisory services set forth below in Section
II. The Adviser agrees that, except as required to carry out its duties under
this Agreement or otherwise expressly authorized, it is acting as an
independent contractor and not as an agent of the Company and has no authority
to act for or represent the Company in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the
following:
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1. supervise all aspects of the operations of the Company;
2. select the securities to be purchased, sold or exchanged by the
Series or otherwise represented in the Series' investment
portfolio, place trades for all such securities and regularly
report thereon to the Board;
3. formulate and implement continuing programs for the purchase
and sale of securities and regularly report thereon to the
Board;
4. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy
generally, the Series, securities held by or under
consideration for the Series, or the issuers of those
securities;
5. provide economic research and securities analyses as the
Adviser considers necessary or advisable in connection with the
Adviser's performance of its duties hereunder;
6. obtain the services of, contract with, and provide instructions
to custodians and/or subcustodians of the Series' securities,
transfer agents, dividend paying agents, pricing services and
other service providers as are necessary to carry out the terms
of this Agreement;
7. prepare financial and performance reports, calculate and report
daily net asset values, and prepare any other financial data or
reports, as the Adviser from time to time, deems necessary or
as are requested by the Board; and
8. take any other actions which appear to the Adviser and the
Board necessary to carry into effect the purposes of this
Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the Company as follows:
1. DUE INCORPORATION AND ORGANIZATION. The Adviser is duly
organized and is in good standing under the laws of the
State of Connecticut and is fully authorized to enter
into this Agreement and carry out its duties and
obligations hereunder.
2. REGISTRATION. The Adviser is registered as an investment
adviser with the Commission under the Advisers Act. The
Adviser shall maintain such registration in effect at all
times during the term of this Agreement.
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3. BEST EFFORTS. The Adviser at all times shall provide its
best judgment and effort to the Series in carrying out
its obligations hereunder.
B. Representations and Warranties of the Company
The Company, on behalf of the Series, hereby represents and warrants to
the Adviser as follows:
1. DUE INCORPORATION AND ORGANIZATION. The Company has been
duly incorporated under the laws of the State of Maryland
and it is authorized to enter into this Agreement and
carry out its obligations hereunder.
2. REGISTRATION. The Company is registered as an investment
company with the Commission under the 1940 Act and shares
of the Series are registered or qualified for offer and
sale to the public under the Securities Act of 1933 (the
"1933 Act") and all applicable state securities laws.
Such registrations or qualifications will be kept in
effect during the term of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
A. Appointment of Subadviser(s)
Subject to the approval of the Board, the Adviser may enter into a
Subadvisory Agreement to engage one or more Subadvisers (the
"Subadviser") to the Adviser with respect to each Series.
B. Duties of Subadviser
Under a Subadvisory Agreement, the Subadviser may be delegated some or
all of the following duties of the Adviser:
1. determine which securities from which issuers shall be
purchased, sold or exchanged by the Series or otherwise
represented in the Series' investment portfolio, place
trades for all such securities, select brokers or dealer
for the execution thereof, and regularly report thereon
to the Board;
2. formulate and implement continuing programs for the
purchase and sale of the securities of such issuers and
regularly report thereon to the Board;
3. obtain and evaluate pertinent information about
significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether
affecting the economy generally, the Series, securities
held by or under consideration for the Series, or the
issuers of those securities;
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4. provide economic research and securities analyses as the
Adviser considers necessary or advisable in connection
with the Adviser's performance of its duties hereunder;
5. give instructions to the custodian and/or sub-custodian
of the Series appointed by the Board, as to deliveries of
securities, transfers of currencies and payments of cash
for the Series as required to carry out the investment
activities of the Series, in relation to the matters
contemplated by this Agreement; and
6. provide such financial support, administrative services
and other duties as the Adviser deems necessary and
appropriate.
C. Duties of the Adviser
In the event the Adviser delegates certain responsibilities hereunder
to one or more Subadvisers, the Adviser shall, among other things:
1. monitor the investment program maintained by the
Subadvisers for the Series and the Subadvisers'
compliance program to ensure that the Series' assets are
invested in compliance with the Subadvisory Agreement and
the Series' investment objectives and policies as adopted
by the Board and described in the most current effective
amendment of the registration statement, as filed with
the Commission under the 1933 Act and the 1940 Act
("Registration Statement");
2. allocate series' assets among such Subadvisers;
3. review all data and financial reports prepared by the
Subadviser to assure that they are in compliance with
applicable requirements and meet the provisions of
applicable laws and regulations;
4. establish and maintain regular communications with the
Subadvisers to share information it obtains with the
Subadvisers concerning the effect of developments and
data on the investment program maintained by the
Subadvisers; and
5. oversee all matters relating to the offer and sale of the
Series' shares, the Company's corporate governance,
reports to the Board, contracts with all third parties on
behalf of the Company for services to the Series, reports
to regulatory authorities and compliance with all
applicable rules and regulations affecting the Company's
operations.
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V. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Adviser, at its own expense, shall place all orders for the
purchase and sale of portfolio securities with brokers or dealers
selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. The Adviser shall use its best efforts to
seek to execute portfolio transactions at prices that are advantageous
to the Series and at commission rates that are reasonable in relation
to the benefits received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage or research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Adviser and/or the
other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser may also select brokers or dealers
to effect transactions for the Series who provide payment for expenses
of the Series. The Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services or expenses, and that
have provided assistance in the distribution of shares of the Series to
the extent permitted by law, a commission for executing a portfolio
transaction for the Series that is in excess of the amount of
commission another broker or dealer would have charged for effecting
that transaction if the Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer and
is paid in compliance with Section 28(e) or other rules and regulations
of the Commission. This determination may be viewed in terms of either
that particular transaction or the overall responsibilities that the
Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. The Board shall periodically
review the commissions paid by the Series to determine if the
commissions paid over representative periods of time were reasonable in
relation to the benefits received.
Any delegation to a Subadviser (as authorized in Section IV above) of
the selection of broker-dealers to execute portfolio transactions will
include instructions consistent with the parameters outlined in this
Section.
VI. CONTROL BY THE BOARD
Any investment program undertaken by the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Adviser on behalf of the Series
pursuant thereto, shall at all times be subject to any directives of the Board.
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VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
1. all applicable provisions of the 1940 Act;
2. the provisions of the current Registration Statement of the
Company;
3. the provisions of the Fund's Articles of Incorporation, as
amended;
4. the provisions of the Bylaws of the Fund, as amended; and
5. any other applicable provisions of state or federal law.
VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Company, on behalf of the Series, shall pay to the
Adviser an annual fee, payable monthly, based upon the following average daily
net assets of the Series:
Portfolio Fee
--------- ---
MFS Capital 0.65% of average daily net assets
Opportunities Portfolio
(formerly Value Equity
Portfolio)
MFS Emerging Equities 0.70% of the first $500 million of
Portfolio average daily net assets;
0.65% on assets over $500 million
MFS Research Growth 0.70% on the first $500 million of
Portfolio average daily net assets;
0.65% on assets over $500 million
Scudder International 0.80% of average daily net assets
Growth Portfolio
T. Rowe Price Growth 0.60% of average daily net assets
Equity Portfolio
Except as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily at the rate of 1/365 of the annual advisory fee
applied to the daily net assets of the Series. If this Agreement becomes
effective subsequent to the first day of a month or terminates before the last
day of a month, compensation for that part of the month this Agreement is in
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effect shall be prorated in a manner consistent with the calculation of the
fees set forth above. Subject to the provisions of Section X hereof, payment of
the Adviser's compensation for the preceding month shall be made as promptly as
possible. For so long as a Subadvisory Agreement is in effect, the Company
acknowledges on behalf of the Series that the Adviser will pay to each
Subadviser, as compensation for acting as a Subadviser to the Series, the fees
specified in the particular Subadvisory Agreement.
IX. EXPENSES
The expenses in connection with the management of the Company shall be
allocated between the Series and the Adviser as follows:
A. Expenses of the Adviser
The Adviser shall pay:
1. the salaries, employment benefits and other related costs
and expenses of those of its personnel engaged in
providing investment advice to the Series, including
without limitation, office space, office equipment,
telephone and postage costs;
2. all fees and expenses of all directors, officers and
employees, if any, of the Company who are employees of
the Adviser or an affiliated entity, including any
salaries and employment benefits payable to those
persons;
B. Expenses of the Series
The Series shall pay:
1. investment advisory fees pursuant to this Agreement;
2. brokers' commissions, issue and transfer taxes or other
transaction fees payable in connection with any
transactions in the securities in the Series' investment
portfolio or other investment transactions incurred in
managing the Series' assets, including portions of
commissions that may be paid to reflect brokerage
research services provided to the Adviser;
3. fees and expenses of the Company's independent
accountants and legal counsel and the independent
Directors' legal counsel;
4. fees and expenses of any administrator, transfer agent,
custodian, dividend, accounting, pricing or disbursing
agent of the Series;
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5. interest and taxes;
6. fees and expenses of any membership in the Investment
Company Institute or any similar organization in which
the Board deems it advisable for the Company to maintain
membership;
7. insurance premiums on property or personnel (including
officers and directors) of the Company which benefit the
Series;
8. all fees and expenses of the Company's directors, who are
not "interested persons" (as defined in the 1940 Act) of
the Company or the Adviser;
9. expenses of preparing, printing and distributing proxies,
proxy statements, prospectuses and reports to
shareholders of the Series, except for those expenses
paid by third parties in connection with the distribution
of Series shares and all costs and expenses of
shareholders' meetings;
10. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares
of the Series or in cash;
11. costs and expenses (other than those detailed in
paragraph 9 above) of promoting the sale of shares issue
by the Series, provided that nothing in this Agreement
shall prevent the charging of such costs to third parties
involved in the distribution of shares issued by the
Series;
12. fees payable by the Series to the Commission or to any
state securities regulator or other regulatory authority
for the registration of shares of the Series in any state
or territory of the United States or of the District of
Columbia;
13. all costs attributable to investor services,
administering shareholder accounts and handling
shareholder relations (including, without limitation,
telephone and personnel expenses), which costs may also
be charged to third parties by the Adviser; and
14. any other ordinary, routine expenses incurred in the
management of the Series' assets, and any nonrecurring or
extraordinary expenses, including organizational
expenses, litigation affecting the Series and any
indemnification by the Company of its officers, directors
or agents.
X. NONEXCLUSIVITY
The services of the Adviser to the Company are not to be deemed to be
exclusive, and the Adviser shall be free to render investment advisory or other
services to others (including other
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<PAGE>
investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers and directors of the Adviser may serve as officers or
directors of the Company, and that officers or directors of the Company may
serve as officers or directors of the Adviser to the extent permitted by law;
and that the officers and directors of the Adviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors or trustees of any
other firm or trust, including other investment
companies.
XI. TERM
This Agreement shall become effective at the close of business on December ---,
2000 and shall remain in force and effect through [date], unless earlier
terminated under the provisions of Article XIII.
XII. RENEWAL
Following the expiration of its initial term, the Agreement shall continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
1. a. by the Board, or
b. by the vote of a majority of the Series' outstanding
voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
2. by the affirmative vote of a majority of the directors who are
not parties to this Agreement or interested persons of a party
to this Agreement (other than as a director of the Company), by
votes cast in person at a meeting specifically called for such
purpose.
XIII. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Board or by vote of a majority of the Series'
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by the Adviser, on sixty (60) days' written notice to the other party. The
notice provided for herein may be waived by the party required to be notified.
This Agreement shall automatically terminate in the event of its "assignment,"
as that term is defined in Section 2(a)(4) of the 1940 Act.
XIV. LIABILITY
The Adviser shall be liable to the Company and shall indemnify the Company for
any losses incurred by the Company, whether in the purchase, holding or sale of
any security or otherwise, to the extent that such losses resulted from an act
or omission on the part of the Adviser or its officers, directors or employees,
that is found to involve willful misfeasance, bad faith or
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<PAGE>
negligence, or reckless disregard by the Adviser of its duties under this
Agreement, in connection with the services rendered by the Adviser hereunder.
XV. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such addresses shall be:
IF TO THE COMPANY, THE SERIES OR THE ADVISER:
Martin T. Conroy
151 Farmington Avenue, TS31
Hartford, Connecticut 06156
Fax number: 860/273-9614
XVI. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise 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 Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in the provisions of this Agreement
is revised by rule, release or order of the Commission, such provisions shall
be deemed to incorporate the effect of such rule, release or order.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on December --, 2000.
Aetna Life Insurance and Annuity
Company
By:/s/
-----------------------------
Attest:/s/ Name:
------------------------ ---------------------------
Title:
--------------------------
Portfolio Partners, Inc. on
behalf of its series,
MFS Capital Opportunities
Portfolio (formerly MFS Value
Equity Portfolio)
MFS Emerging Equities Portfolio
MFS Research Growth Portfolio
Scudder International Growth
Portfolio
T. Rowe Price Growth Equity
Portfolio
By:/s/
-----------------------------
Attest:/s/ Name:
------------------------ ---------------------------
Title:
--------------------------
44
<PAGE>
EXHIBIT 2
FORM OF NEW
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
INVESTMENT SUBADVISORY AGREEMENT, made as of the [ ] day of December, 2000
between Aetna Life Insurance and Annuity Company (the "Adviser"), an insurance
corporation organized and existing under the laws of the State of Connecticut,
and Massachusetts Financial Services Company ("Subadviser"), a business trust
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 December, 2000 ("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 MFS Emerging Equities Portfolio, MFS Research Growth
Portfolio and MFS Value Equity Portfolio, portfolios of the Company
(collectively, the "Portfolios"), 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:
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<PAGE>
1. APPOINTMENT. Adviser hereby appoints the Subadviser as its investment
Subadviser with respect to the Portfolios 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 each Portfolio in accordance with its 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 each
Portfolio in a manner consistent with each 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 each Portfolio; and
(ii) 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 (in such form as the Adviser
and Subadviser mutually agree) with respect to the
implementation of the investment program and, in addition,
provide such statistical information and special reports
concerning the Portfolios and/or important developments
materially affecting the investments held, or contemplated
to be purchased, by the Portfolios, as may reasonably be
requested by the Board or the Adviser and agreed to by the
Subadviser, including attendance
46
<PAGE>
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 Portfolios 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 Portfolios, 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 Portfolios' agent and attorney-in-fact.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel,
including salaries, expenses and fees of any personnel required for it
to faithfully perform its duties under this Agreement; and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment required for it to faithfully and fully perform its
duties and obligations under this Agreement.
D. The Subadviser will select brokers and dealers to effect all
Portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or
issuers, and will negotiate brokerage commissions if applicable. The
Subadviser is directed at all times to seek to execute brokerage
transactions for the Portfolios 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
Portfolios, in the name of the Portfolios or their nominees, the
Subadviser shall use its best efforts to obtain for the Portfolios the
most favorable price and best execution available, considering all of
the
47
<PAGE>
circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Adviser and the Board, the Subadviser may, to the extent authorized by
Section 28(e) of the Securities Exchange Act of 1934, cause the
Portfolio to pay a broker or dealer that provides brokerage or
research services to the Subadviser, an amount of commission for
effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting
that transaction if the Subadviser determines, in good faith, that
such amount of commission is reasonable in relationship to the value
of such brokerage or research services provided viewed in terms of
that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To
the extent authorized by said Section 28(e) and the Adviser and the
Board, the Subadviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise
solely by reason of such action. In addition, subject to seeking the
best execution available, the Subadviser may also consider sales of
shares of the Portfolio as a factor in the selection of brokers and
dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of a 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 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 Portfolios and to its other clients.
F. With respect to the provision of services by the Subadviser hereunder,
the Subadviser will maintain all accounts, books and records with respect
to each Portfolio as are required of an investment adviser of a registered
investment company pursuant to the 1940 Act and the Advisers Act and the
rules under both statutes.
G. The Subadviser and the Adviser acknowledge that the Subadviser is not
the compliance agent for the Portfolios, 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 this Agreement, the Subadviser
shall perform compliance testing with respect to the Portfolios based upon
information in its possession and upon information and written
instructions received from the Adviser or the Administrator and shall not
be held in breach of this Agreement so long as it performs in accordance
with such information and instructions. The Adviser or Administrator
shall promptly provide the Subadviser with copies of the Company's current
Prospectus and any written policies or procedures adopted by the Board
applicable to the Portfolios and any amendments or revisions thereto.
48
<PAGE>
H. Unless the Adviser gives the Subadviser written instructions to the
contrary, the Subadviser shall use its good faith judgment in a manner
which it reasonably believes best serves the interests of a 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.
I. Subadviser hereby authorizes Adviser to use Subadviser's name and any
applicable trademarks in the Company's Prospectus, as well as in any
advertisement or sales literature used by the Adviser or its agents to
promote the Company and/or to provide information to shareholders of the
Portfolios.
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 three 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.
3. Compensation of Subadviser. The Adviser will pay the Subadviser, with
respect to each Portfolio, the compensation specified in Appendix A to
this Agreement. Payments shall be made to the Subadviser on the second
day of each month; however, this advisory fee will be calculated based on
the daily average value of the aggregate assets of all Portfolios subject
to the Subadviser's management 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 Portfolios,
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 Portfolios 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
49
<PAGE>
activities. It is understood and agreed that the directors, officers, and
employees of the Subadviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors, trustees, or employees of any
other firm or corporation, including other investment companies.
6. Adviser Oversight and Cooperation with Regulators. The Adviser and
Subadviser shall cooperate with each other in providing records, reports
and other materials to regulatory and administrative bodies having proper
jurisdiction over the Company, the Adviser and the Subadviser, 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 either the
Subadviser or Adviser reasonably believes the regulatory or administrative
body does not have the authority to request or which is privileged or
confidential information of the Subadviser or Adviser.
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 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; provided however, that the Subadviser may retain copies
thereof. The Subadviser shall keep confidential any nonpublic 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 Portfolios on the later of the date of its execution or the date of
the commencement of operations of the Portfolios. 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 1940 Act) ("Independent
Directors") of any party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval.
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
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<PAGE>
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 a 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 with respect to a Portfolio, without the
payment of any penalty, by vote of
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<PAGE>
the Board or by a vote of a majority of the outstanding voting securities
of such Portfolio on 60 days' prior written notice to the Subadviser.
This Agreement may also be terminated by the Adviser: (i) on at least 120
days' prior written notice to the Subadviser, without the payment of any
penalty; (ii) upon material breach by the Subadviser of any of the
representations and warranties, if such breach shall not have been cured
within a 20-day period after notice of such breach; or (iii) if the
Subadviser becomes unable to discharge its duties and obligations under
this Agreement. The Subadviser may terminate this Agreement at any time,
without the payment of any penalty, on at least 90 days' prior notice to
the Adviser. This Agreement shall terminate automatically in the event of
its assignment or upon termination of the Advisory Agreement between the
Company and the Adviser.
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 Portfolios 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,"
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<PAGE>
"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.
Aetna Life Insurance and Annuity Company
Attest: By: /s/
----------------------------------
----------------------------------
(Title)
/s/
----------------------------
Massachusetts Financial Services Company
Attest: By: /s/
----------------------------------
----------------------------------
(Title)
/s/
----------------------------
53
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APPENDIX A
FEE SCHEDULE
MFS Capital Opportunities Portfolio .40% on the first $300 million of
(formerly MFS Value Equity Portfolio) aggregate average daily net assets
under management
MFS Emerging Equities Portfolio .375% on the next $300 million
MFS Research Growth Portfolio .35% on the next $300 million
.325% on the next $600 million
.25% on assets over $1.5 billion
54
<PAGE>
EXHIBIT 3
FORM OF NEW
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
SCUDDER KEMPER INVESTMENTS, INC.
INVESTMENT SUBADVISORY AGREEMENT, made as of the [ ] day of December, 2000
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 December [ ], 2000 ("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
55
<PAGE>
Subadviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. DUTIES OF THE SUBADVISER
A. INVESTMENT SUBADVISORY SERVICES. Subject to the supervision of the
Company's Board of Directors ("Board") and the Adviser, the Subadviser
shall act as the investment Subadviser and shall supervise and direct the
investments of the Portfolio in accordance with the portfolio's investment
objective, policies, and restrictions as provided in the Company's
Prospectus and Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time (hereinafter referred to
as the "Prospectus"), and such other limitations as the Company may impose
by notice in writing to the Subadviser. The Subadviser shall obtain and
evaluate such information relating to the economy, industries, businesses,
securities markets, and individual securities as it may deem necessary or
useful in the discharge of its obligations hereunder and shall formulate
and implement a continuing program for the management of the assets and
resources of the Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions, and in compliance with
the requirements applicable to registered investment companies under
applicable laws and those requirements applicable to both regulated
investment companies and segregated asset accounts under Subchapters M and
L of the Internal Revenue Code of 1986, as amended ("Code"). To implement
its duties, the Subadviser is hereby authorized to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets on behalf of the
Portfolio; and
(ii) directly or through the trading desks of 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;
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(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:
(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;
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(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 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.
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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
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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 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
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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 December __, 2000. This Agreement will remain in effect through
December __, 2002, 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.
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:
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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 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.
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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.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Aetna Life Insurance and Annuity Company
By:
-----------------------------------
Attest: Title
-----------------------------
----------------------------
Title
Scudder Kemper Investments, Inc.
By:
-----------------------------------
Attest: Title
-----------------------------
----------------------------
Title
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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
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EXHIBIT 4
FORM OF NEW
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
T. ROWE PRICE ASSOCIATES, INC.
INVESTMENT SUBADVISORY AGREEMENT, made as of the [ ] day of December 2000
between Aetna Life Insurance and Annuity Company (the "Adviser"), an insurance
corporation organized and existing under the laws of the State of Connecticut,
and T. Rowe Price Associates, Inc. ("Subadviser"), a corporation organized and
existing under the laws of the State of Maryland.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the December [ ], 2000 ("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 T. Rowe Price Growth Equity Portfolio (the "Portfolio"),
a portfolio of the Company, to furnish certain investment advisory services to
the Adviser and the Company and the Subadviser is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set
forth, the parties hereto agree as follows:
1. APPOINTMENT. Adviser hereby appoints the Subadviser as its investment
Subadviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The
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Subadviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. DUTIES OF THE SUBADVISER
A. INVESTMENT SUBADVISORY SERVICES. Subject to the supervision of the
Company's Board of Directors ("Board") and the Adviser, the Subadviser
shall act as the investment Subadviser and shall supervise and direct the
investments of the Portfolio in accordance with the portfolio's investment
objective, policies, and restrictions as provided in the Company's
Prospectus and Statement of Additional Information, as currently in effect
and as amended or supplemented from time to time (hereinafter referred to
as the "Prospectus"), and such other limitations as the Company may impose
by notice in writing to the Subadviser. The Subadviser shall obtain and
evaluate such information relating to the economy, industries, businesses,
securities markets, and individual securities as it may deem necessary or
useful in the discharge of its obligations hereunder and shall formulate
and implement a continuing program for the management of the assets and
resources of the Portfolio in a manner consistent with the Portfolio's
investment objective, policies, and restrictions, and in compliance with
the requirements applicable to registered investment companies under
applicable laws and those requirements applicable to both regulated
investment companies and segregated asset accounts under Subchapters M and
L of the Internal Revenue Code of 1986, as amended ("Code"). To implement
its duties, the Subadviser is hereby authorized to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets on behalf of the
Portfolio; and
(ii) directly or through the trading desks of T. Rowe Price Associates,
Inc. place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Subadviser may select.
B. SUBADVISER UNDERTAKINGS. In all matters relating to the performance of
this Agreement, the Subadviser shall act in conformity with the Company's
Articles of Incorporation, By-Laws, and current Prospectus and with the
written instructions and directions of the Board and the Adviser. The
Subadviser hereby agrees to:
(i) regularly (but no less frequently than quarterly) report to the
Board and the Adviser with respect to the implementation of the
investment program and, in addition, provide such statistical
information and special reports concerning the Portfolio and/or
important developments materially affecting the investments held,
or contemplated to be purchased, by the Portfolio, as may
reasonably be requested by the Board or the Adviser and agreed to
by the Subadviser, including attendance at Board meetings, as
reasonably requested, to present such information and reports to
the Board;
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(ii) consult with the Company's pricing agent regarding the valuation
of securities that are not registered for public sale, not traded
on any securities markets, or otherwise may be deemed illiquid for
purposes of the 1940 Act and for which market quotations are not
readily available;
(iii)establish appropriate personal contacts with the Adviser and the
Company's Administrator in order to provide the Adviser and
Administrator with information as reasonably requested by the
Adviser or Administrator; and
(iv) execute account documentation, agreements, contracts and other
documents as the Adviser shall be requested by brokers, dealers,
counterparties and other persons to execute in connection with its
management of the assets of the Portfolio, provided that the
Subadviser receives the express agreement and consent of the
Adviser and/or the Board to execute such documentation,
agreements, contracts and other documents. In such respect, and
only for this limited purpose, the Subadviser shall act as the
Adviser and/or the Portfolio's agent and attorney-in-fact.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative
facilities, including bookkeeping, clerical personnel and equipment
required for it to faithfully and fully perform its duties and obligations
under this Agreement.
D. The Subadviser will select brokers and dealers to effect all Portfolio
transactions subject to the conditions set forth herein. The Subadviser
will place all necessary orders with brokers, dealers, or issuers, and will
negotiate brokerage commissions if applicable. The Subadviser is directed
at all times to seek to execute brokerage transactions for the Portfolio in
accordance with such policies or practices as may be established by the
Board and the Adviser and described in the current Prospectus as amended
from time to time. In placing orders for the purchase or sale of
investments for the Portfolio, in the name of the Portfolio or its
nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the best execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the Adviser
and the Board, the Subadviser may, to the extent authorized by Section
28(e) of the Securities Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the
Subadviser, an amount of commission for effecting a portfolio transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Subadviser determines, in
good faith, that such 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
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not be deemed to have acted unlawfully or to have breached any duty created
by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the best execution available, the Subadviser
may also consider sales of shares of the Portfolio as a factor in the
selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients of the Subadviser, the Subadviser, to the extent permitted by
applicable laws and regulations, and subject to the Adviser's initial
approval of the Subadviser's procedures, may, but shall be under no
obligation to, aggregate the orders for securities to be purchased or sold
to attempt to obtain a more favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers to be
the most equitable and consistent with its fiduciary obligations to the
Portfolio and to its other clients.
F. With respect to the provision of services by the Subadviser hereunder,
the Subadviser will maintain all accounts, books and records with respect
to the Portfolio as are required of an investment adviser of a registered
investment company pursuant to the 1940 Act and the Advisers Act and the
rules under both statutes.
G. The Subadviser and the Adviser acknowledge that the Subadviser is not
the compliance agent for the Portfolio, and does not have access to all of
the Company's books and records necessary to perform certain compliance
testing. However, to the extent that the Subadviser has agreed to perform
the services specified in Section 2A, the Subadviser shall perform
compliance testing with respect to the Portfolio based upon information in
its possession and upon information and written instructions received from
the Adviser or the Administrator. The Adviser or Administrator shall
promptly provide the Subadviser with copies of the Company's current
Prospectus, Articles of Incorporation and By-Laws and any written policies
or procedures adopted by the Board applicable to the Portfolio and any
amendments or revisions thereto.
H. Unless the Adviser gives the Subadviser written instructions to the
contrary, the Subadviser shall use its good faith judgment in a manner
which it reasonably believes best serves the interests of the Portfolio's
shareholders to vote or abstain from voting all proxies solicited by or
with respect to the issuers of securities in which assets of the Portfolio
may be invested. The Adviser shall furnish the Subadviser with any further
documents, materials or information that the Subadviser may reasonably
request to enable it to perform its duties pursuant to this Agreement.
I. Subadviser hereby authorizes Adviser to use Subadviser's name and any
applicable trademarks in the Company's Prospectus, as well as in any
advertisement or sales literature used by the Adviser or its agents to
promote the Company and/or to provide information to shareholders of the
Portfolio in accordance with the terms of the License Agreement entered
into between the parties hereto dated October 28, 1997.
69
<PAGE>
Subadviser will provide reasonable marketing support to Adviser in
connection with the promotion of the Portfolio.
3. COMPENSATION OF SUBADVISER. The Adviser will pay the Subadviser, with
respect to the Portfolio, the compensation specified in Appendix A to this
Agreement. Payments shall be made to the Subadviser on the second day of each
month; however, this advisory fee will be calculated based on the daily average
value of the Portfolio's assets and accrued on a daily basis. Compensation for
any partial period shall be pro-rated based on the length of the period.
4. LIABILITY OF SUBADVISER. Neither the Subadviser nor any of its directors,
officers, employees or agents shall be liable to the Adviser, the Company, or
the Company's shareholders for any loss or expense suffered by the Adviser, the
Company, or the Company's shareholders resulting from its acts or omissions as
Subadviser to the Portfolio, except for losses or expenses to the Adviser, the
Company, or the Company's shareholders resulting from willful misconduct, bad
faith, or gross negligence in the performance of, or from reckless disregard
of, the Subadviser's duties under this Agreement. Neither the Subadviser nor
any of its agents shall be liable to the Adviser, the Company, or the Company's
shareholders for any loss or expense suffered as a consequence of any action or
inaction of other service providers to the Company in failing to observe the
instructions of the Adviser, provided such action or inaction of such other
service providers to the Company is not a result of the willful misconduct, bad
faith or gross negligence in the performance of, or from reckless disregard of,
the duties of the Subadviser under this Agreement.
5. NON-EXCLUSIVITY. The services of the Subadviser to the Portfolio and the
Company are not to be deemed to be exclusive, and the Subadviser shall be free
to render investment advisory or other services to others (including other
investment companies) and to engage in other activities. It is understood and
agreed that the directors, officers, and employees of the Subadviser are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors,
trustees, or employees of any other firm or corporation, including other
investment companies.
6. ADVISER OVERSIGHT AND COOPERATION WITH REGULATORS. The Subadviser shall
cooperate in providing records, reports and other materials relating to the
Company that are in its possession, at the request of the Adviser, and in
response to inquiries by regulatory and administrative bodies having proper
jurisdiction over the Company, in connection with the services provided
pursuant to this Agreement; provided, however, that this agreement to cooperate
does not apply to the provision of information, reports and other materials
which the Subadviser reasonably believes the 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
70
<PAGE>
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 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.
9. REPRESENTATIONS OF SUBADVISER. The Subadviser represents, warrants, and
agrees as follows:
A. The Subadviser: (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this Agreement;
(iii) has met, and will use its best efforts to continue to meet for so
long as this Agreement remains in effect, any other applicable federal or
state requirements, or the applicable requirements of any regulatory or
industry self-regulatory organization, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the authority
to enter into and perform the services contemplated by this Agreement; and
(v) will immediately notify the Adviser of the occurrence of any event that
would disqualify the Subadviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. The Subadviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not already
done so, will provide the Adviser and the Company with a copy of such code
of ethics, together with evidence of its adoption.
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:
71
<PAGE>
A. the Subadviser fails to be registered as an investment adviser under
the Advisers Act or under the laws of any jurisdiction in which the
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
B. the Subadviser or the Company is served or otherwise receives notice
of any action, suit, proceeding, inquiry, or investigation, at law or in
equity, before or by any court, public board, or body, involving the
affairs of the Company;
C. a controlling stockholder of the Subadviser or the portfolio manager
of the Portfolio changes or there is otherwise an actual change in control
or management of the Subadviser.
11. PROVISION OF CERTAIN INFORMATION BY THE ADVISER. The Adviser will promptly
notify the Subadviser in writing of the occurrence of any of the following
events:
A. the Adviser fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry, or investigation, at law or in equity, before or
by any court, public board, or body, involving the affairs of the Company;
C. a controlling stockholder of the Adviser changes or there is otherwise
an actual change in control or management of the Adviser.
12. TERMINATION OF AGREEMENT. Notwithstanding the foregoing, this Agreement
may be terminated at any time, without the payment of any penalty, by vote of
the Board or by a vote of a majority of the outstanding voting securities of
the Portfolio on 60 days' prior written notice to the Subadviser. This
Agreement may also be terminated by the Adviser: (i) on at least 120 days'
prior written notice to the Subadviser, without the payment of any penalty;
(ii) upon material breach by the Subadviser of any of the representations and
warranties, if such breach shall not have been cured within a 20-day period
after notice of such breach; or (iii) if the Subadviser becomes unable to
discharge its duties and obligations under this Agreement. The Subadviser may
terminate this Agreement at any time, without the payment of any penalty, on at
least 90 days' prior notice to the Adviser. This Agreement shall terminate
automatically in the event of its assignment or upon termination of the
Advisory Agreement between the Company and the Adviser.
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.
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<PAGE>
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.
73
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Aetna Life Insurance and Annuity Company
By: /s/
------------------------------------
Attest:
Title
/s/
---------------------------------
Title
T. Rowe Price Associates, Inc.
By: /s/
------------------------------------
Attest:
Title
/s/
---------------------------------
Title
74
<PAGE>
APPENDIX A
FEE SCHEDULE
T. Rowe Price Growth Equity .40% on the first $500 million of average daily
net assets
.375% on assets over $500 million
75
<PAGE>
APPENDIX 1
PORTFOLIO TOTAL SHARES OUTSTANDING
--------- ------------------------
AS OF RECORD DATE
-----------------
MFS CAPITAL OPPORTUNITIES
MFS EMERGING EQUITIES
MFS RESEARCH GROWTH
SCUDDER INTERNATIONAL GROWTH
T. ROWE PRICE GROWTH EQUITY
76
<PAGE>
APPENDIX 2
BENEFICIAL OWNERS OF MORE THAN 5% OF ANY PORTFOLIO OF THE FUND
Shares of the Portfolios are owned by insurance companies as depositors of
separate accounts, which are used to fund variable annuity contracts ("VA
Contracts") and variable life insurance contracts ("VLI Contracts"). Aetna and
its subsidiary, Aetna Insurance Company of America, Inc. may be deemed to be
control persons of the Fund in that certain of their separate accounts hold
100% of the shares of each Portfolio of the Fund.
As of September 8, 2000, the following owned of record or, to the knowledge of
management, beneficially owned more than 5% of the outstanding shares of:
AMOUNT AND
----------
NATURE OF
---------
BENEFICIAL PERCENT
---------- -------
PORTFOLIO NAME NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP*
-------------- ------------------------------------ ----------
MFS CAPITAL --Aetna Life Insurance & Annuity %
OPPORTUNITIES Company (ALIAC), c/o Aetna Financial
PORTFOLIO Services, Treasury Services, 151
Farmington Avenue, Hartford,
Connecticut 06156
MFS EMERGING --Aetna Life Insurance & Annuity %
EQUITIES Company (ALIAC), c/o Aetna Financial
PORTFOLIO Services, Treasury Services, 151
Farmington Avenue, Hartford,
Connecticut 06156
MFS RESEARCH --Aetna Life Insurance & Annuity %
GROWTH PORTFOLIO Company (ALIAC), c/o Aetna Financial
Plan Services, Treasury Services,
151 Farmington Avenue, Hartford,
Connecticut 06156
SCUDDER --Aetna Life Insurance & Annuity %
INTERNATIONAL Company (ALIAC), c/o Aetna Financial
GROWTH PORTFOLIO Services, Treasury Services, 151
Farmington Avenue, Hartford,
Connecticut 06156
T. ROWE PRICE --Aetna Life Insurance & Annuity %
GROWTH EQUITY Company (ALIAC), c/o Aetna Financial
PORTFOLIO Services, Treasury Services, 151
Farmington Avenue, Hartford,
Connecticut 06156
*Each of these entities is the shareholder of record and may be deemed to be
the beneficial owner of the shares listed for certain purposes under the
securities laws, although in certain instances they may not have an economic
interest in these shares and would, therefore, ordinarily disclaim any
beneficial ownership therein.
The Fund has no knowledge of any other owners of record of 5% or more of the
outstanding shares of a Portfolio.
Aetna Life Insurance & Annuity Company is an indirect wholly-owned subsidiary
of Aetna Retirement Services, Inc., which is in turn an indirect wholly owned
subsidiary of Aetna Inc. Aetna's principal office and offices of its affiliated
companies referred to herein are located at 151 Farmington Avenue, Hartford,
Connecticut 06156.
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<PAGE>
APPENDIX 3
DIRECTOR AND OFFICER SHAREHOLDINGS
The Directors and Officers of the Fund as a group owned less than 1% of the
outstanding shares of any Portfolio of the Fund as of September 8, 2000.
78
<PAGE>
APPENDIX 4
EXECUTIVE OFFICERS OF PORTFOLIO PARTNERS, INC.
PRINCIPAL OCCUPATION(S) DURING
------------------------------
PAST FIVE YEARS (AND POSITIONS
------------------------------
HELD WITH AFFILIATED PERSONS
----------------------------
NAME, ADDRESS AND POSITION(S) HELD WITH OR PRINCIPAL UNDERWRITER OF
----------------- --------------------- ---------------------------
BIRTH DATE FUND THE FUND)
---------- ---- ---------
Laurie M. Director and President Vice President, Aetna Life
Tillinghast, CFP* Insurance and Annuity Company,
151 Farmington January 1998 to present; Vice
Avenue President, Aetna Retirement
Hartford, Services, Fund Strategy and
Connecticut Management, December 1995 to
05/12/52 January 1998; Vice President,
Connecticut Mutual Financial
Services, Investment Products,
July 1994 to December 1995.
Martin T. Conroy* Director, Vice President, Assistant Treasurer, Aetna
151 Farmington Chief Financial Officer Retirement Holdings, Inc.,
Avenue and Treasurer September 1997 to present;
Hartford, Assistant Treasurer, Aetna
Connecticut Life Insurance and Annuity
01/11/40 Company, October 1991 to
present.
Jeffrey J. Gaboury Assistant Treasurer Director, Reporting and
200 Clarendon Compliance, Investors Bank &
Street Trust Company, 1996 - present;
Boston, Compliance Manager, Scudder
Massachusetts Kemper Investments, Inc.,
10/23/68 1995 - 1996.
Susan C. Mosher Secretary Director and Senior Counsel,
200 Clarendon Mutual Fund Administration -
Street Legal Administration,
Boston, Investors Bank & Trust
Massachusetts Company, 1995 - present;
01/29/55 Associate Counsel, 440
Financial Group of Worcester,
Inc., 1993 - 1995.
79
<PAGE>
J. Neil McMurdie Assistant Secretary Counsel, Aetna Life Insurance
151 Farmington and Annuity Company, 1998 -
Avenue present; Associate Counsel and
Hartford, Assistant Vice President, GE
Connecticut Financial Assurance and
10/29/57 subsidiaries, 1993 - 1998.
Arlyn E. Whitelaw Assistant Secretary Associate Counsel, Mutual Fund
200 Clarendon Administration - Legal
Street Administration, Investors Bank
Boston, & Trust Company - 2000;
Massachusetts Associate Legal Product
12/23/62 Specialist and Client Support
Administrator, Putnam
Investments, 1997-2000;
Attorney, Volunteer Lawyers
Project, 1996-1997; Document
Analyst, Tech Law, Inc.,
1995-1996.
* Interested person as defined by the Investment Company Act of 1940.
80
<PAGE>
APPENDIX 5
INVESTMENT ADVISORY FEE RATES
Investment Advisory fees under the New Advisory Agreement will be the same
as those under the Current Advisory Agreement. The tables below show the
current fees of each of the Portfolios pertaining to the discussion of Proposal
1. For the services rendered, the facilities furnished and the expenses assumed
by the Adviser, the Fund, on behalf of the Portfolios, shall pay to the Adviser
an annual fee, payable monthly, based upon the average daily net assets of each
Portfolio according to the following schedule:
FEE RATES UNDER THE CURRENT AGREEMENT AND THE PROPOSED NEW AGREEMENT
--------------------------------------------------------------------
PORTFOLIO FEE
--------- ---
MFS Capital 0.65% of average daily net assets
Opportunities Portfolio
(formerly MFS Value
Equity Portfolio)
MFS Emerging Equities 0.70% of the first $500 million of average
Portfolio daily net assets;
0.65% on assets over $500 million
MFS Research Growth 0.70% on the first $500 million of average
Portfolio daily net assets;
0.65% on assets over $500 million
Scudder International 0.80% of average daily net assets
Growth Portfolio
T. Rowe Price Growth .60% of average daily net assets
Equity Portfolio
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<PAGE>
PORTFOLIO EXPENSES
Portfolio Expenses under the New Advisory Agreement will be the same as
those under the Current Advisory Agreement. The tables below show the current
and proposed expenses of each of the Portfolios assuming the approval of
Proposal 1. The information in the fees tables below is based an the
performance results for the fiscal year ended December 31, 1999, and on the
level of net assets in each Portfolio at the end of that year. The fee tables
do not reflect separate account expenses, including sales loads. The management
fee for each Portfolio is computed as a percentage of the average daily net
assets of that Portfolio on an annualized basis.
PORTFOLIO EXPENSES UNDER THE CURRENT ADVISORY AGREEMENT AND THE NEW ADVISORY
----------------------------------------------------------------------------
AGREEMENT
---------
MFS CAPITAL OPPORTUNITIES PORTFOLIO
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Management Fees 0.65%
Other Expenses 0.25%
-----
Total Annual Portfolio Operating Expenses 0.90%
MFS EMERGING EQUITIES PORTFOLIO
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Management Fees 0.67%
Other Expenses 0.13%
-----
Total Annual Portfolio Operating Expenses 0.80%
MFS RESEARCH GROWTH PORTFOLIO
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Management Fees 0.70%
Other Expenses 0.15%
-----
Total Annual Portfolio Operating Expenses 0.85%
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Management Fees 0.80%
Other Expenses 0.20%
-----
Total Annual Portfolio Operating Expenses 1.00%
T. ROWE PRICE GROWTH EQUITY PORTFOLIO
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from Fund assets)
Management Fees 0.60%
Other Expenses 0.15%
-----
Total Annual Portfolio Operating Expenses 0.75%
82
<PAGE>
EXAMPLE
The Examples below assume that you invest $10,000 in the respective Portfolio
for the time periods indicated, and then redeem all of your shares at the end
of those periods. The examples also assume your investment has a 5% return each
year and that the respective Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
EXAMPLES UNDER THE CURRENT ADVISORY AGREEMENT AND THE NEW ADVISORY AGREEMENT
----------------------------------------------------------------------------
MFS CAPITAL OPPORTUNITIES PORTFOLIO
1 year $92
3 years $287
5 years $498
10 years $1,108
MFS EMERGING EQUITIES PORTFOLIO
1 year $82
3 years $255
5 years $444
10 years $990
MFS RESEARCH GROWTH PORTFOLIO
1 year $87
3 years $271
5 years $471
10 years $1,049
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
1 year $102
3 years $318
5 years $552
10 years $1,225
T. ROWE PRICE GROWTH EQUITY PORTFOLIO
1 year $77
3 years $240
5 years $417
10 years $930
83
<PAGE>
APPENDIX 6
FUND EXPENSE LIMITATIONS
Aetna has voluntarily agreed to reimburse the Portfolios for expenses
and/or waive its fees, so that, through at least April 30, 2001, the aggregate
of each Portfolio's administrative and advisory service fees or expenses will
not exceed the combined investment advisory and administrative service fee
rates shown below.
FUND NAME EXPENSE LIMITATION
--------- ------------------
MFS Capital Opportunities Portfolio 0.90%
MFS Emerging Equities Portfolio 0.80%
MFS Research Growth Portfolio 0.85%
Scudder International Growth Portfolio 1.00%
T. Rowe Price Growth Equity Portfolio 0.75%
84
<PAGE>
APPENDIX 7
ADDITIONAL INFORMATION ABOUT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
[Aetna Life Insurance and Annuity Company is a wholly owned subsidiary of Aetna
Retirement Holdings, Inc.; Aetna Retirement Holdings, Inc. is a wholly owned
subsidiary of Aetna Retirement Services, Inc.; Aetna Retirement Services, Inc.
is a wholly owned subsidiary of Aetna Services, Inc.; and Aetna Services, Inc.
is a wholly owned subsidiary of Aetna Inc. ] Aetna Life Insurance and Annuity
Company and all other entities listed above are located 151 Farmington Ave.,
Hartford, CT. In addition, Aeltus Investment Management, Inc., a wholly-owned
subsidiary of Aetna Investment Adviser Holding Company, and Aetna Investment
Adviser Holding Company, Inc., a wholly-owned subsidiary of Aetna Life Insurance
Annuity Company are located at 10 State House Square, Hartford, CT 06103-3602
and 151 Farmington Ave., Hartford, CT, respectively.
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF ALIAC
NAME, POSITIONS AND OFFICES WITH OTHER PRINCIPAL POSITION(S) HELD
ADDRESSES* INVESTMENT ADVISER SINCE DECEMBER 31, 1998
Thomas J. Director and President Director and President (since
McInerney September 2000) - Aetna Life
Insurance and Annuity Company;
Aetna Retirement Holdings, Inc.,
Aetna Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.;
Aetna Retirement Services, Inc.;
Director and President (since
September 1997) - Aetna
Insurance Company of America;
Executive Vice President (since
August 1997) - Aetna Inc.;
Director and President (October
1998 - May 2000) - Aetna
Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.;
Director (February 1998 - May
2000) and President (April 1998
- May 2000) - Aetna Retirement
Services, Inc.; Director (August
1997 - May 2000) and President
(September 1997 - May 2000) -
Aetna Life Insurance and Annuity
Company; Director and President
(September 1997 - May 2000) -
Aetna Retirement Holdings, Inc.
Allan Baker Director and Senior Vice Director (since May 2000) and
President Senior Vice President (since
April 1999) - Aetna Life
Insurance and Annuity Company;
Director, President and Chief
Operating Officer (since May
2000) - Aetna Financial
Services, Inc.; Senior Vice
President (since May 2000) -
Aetna Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.,
Aetna Retirement Services, Inc.
(since April 1999); Vice
President (January 1998 - April
1999) - Aetna Life Insurance and
Annuity Company
85
<PAGE>
Catherine H. Director, Senior Vice President Director (since February 2000) -
Smith and Chief Financial Officer Aetna Trust Company, FSB;
Director (since October 1998) -
Aetna Investment Adviser Holding
Company, Inc.; Aetna Services
Holding Company, Inc.; Director
(since October 1998) - Aetna
Retail Holding Company, Inc.;
Director (since March 1998) -
Aetna Retirement Holdings, Inc.;
Director (since March 1998) _
Aetna Insurance Company of
America; Director and Senior
Vice President, Business
Strategy and Finance and Chief
Financial Officer (since March
1998) - Aetna Life Insurance and
Annuity Company; Director and
Senior Vice President (since
March 1999), Chief Financial
Officer (since February 1998) -
Aetna Retirement Services, Inc.;
Senior Vice President (October
1998 - May 2000) - Aetna
Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Retirement Holdings, Inc.
(February 1998 - May 2000); Vice
President, Strategy, Finance and
Administration, Financial
Relations (September 1996 -
February 1998) - Aetna Inc.
Brian Murphy Vice President and Chief Vice President and Chief
Compliance Officer Compliance Officer (since May
2000) - Aetna Life Insurance and
Annuity Company; Chief
Compliance Officer (since June
2000) - Systematized Benefits
Administrators, Inc.
Deborah Vice President, Corporate Vice President, Treasurer and
Koltenuk Controller and Assistant Chief Financial Officer (since
Treasurer May 2000) - Aetna Investment
Services, Inc.; Treasurer (since
June 2000) - Systematized
Benefits Administrators, Inc.;
Vice President, Corporate
Controller and Assistant
Treasurer (since July 1999) -
Aetna Retirement Services, Inc.;
Vice President, Corporate
Controller and Assistant
Treasurer (since June 1999) -
Aetna Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.,
Aetna Life Insurance and Annuity
Company, Aetna Insurance Company
of America, Aetna Retirement
Holdings, Inc.; Vice President,
Corporate Controller and
Assistant Treasurer (April 1999
- July 1999) - Aetna Retirement
Services, Inc.; Vice President,
Treasurer and Corporate
Controller (October 1998 - June
1999) - Aetna Investment Adviser
Holding Company, Inc., Aetna
Retail Holding Company, Inc.,
Aetna Services Holding Company,
Inc.; Vice President and
Controller (April 1997 - April
1999) - Aetna Retirement
Services, Inc.; Vice President,
Treasurer and Corporate
Controller (April 1997 - June
1999) - Aetna Insurance Company
of America; Vice President,
Treasurer and Corporate
Controller (July 1996 - June
1999) - Aetna Life Insurance and
Annuity Company; Vice President,
Treasurer and Corporate
Controller (September 1996 -
June 1999) - Aetna Retirement
Holdings, Inc.
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Kirk Wickman Senior Vice President, General Senior Vice President, General
Counsel and Corporate Secretary Counsel and Corporate Secretary
(since June 2000) - Aetna Life
Insurance and Annuity Company;
Senior Vice President and
General Counsel (since June
2000); Aetna Retirement
Holdings, Inc., Aetna Services
Holding Company, Inc., Aetna
Retail holding Company, Inc.;
Senior Vice President, General
Counsel and Corporate Secretary
(June 1999 - May 2000) - Aetna
Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.;
Senior Vice President, General
Counsel and Corporate Secretary
(since April 1999) - Aetna
Retirement Services, Inc.; Vice
President, General Counsel and
Corporate Secretary (October
1998 - June 1999) - Aetna
Investment Adviser Holding
Company, Inc., Aetna Retail
Holding Company, Inc., Aetna
Services Holding Company, Inc.;
Vice President, General Counsel
and Corporate Secretary
(December 1996 - June 1999) -
Aetna Retirement Holdings, Inc.;
Senior Vice President (March
1999 - May 2000), General
Counsel and Corporate Secretary
(November 1996 - May 2000), Vice
President (November 1996 - March
1999) - Aetna Life Insurance and
Annuity Company.
*The principal business address of each person named is 151 Farmington Avenue,
Hartford, Connecticut 06156.
COMMON OFFICERS AND DIRECTORS OF PORTFOLIO PARTNERS, INC. AND ALIAC
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
BUSINESS ADDRESS* ALIAC PORTFOLIO PARTNERS, INC.
Laurie M. Tillinghast Vice President Director and President
c/o 151 Farmington
Avenue, Hartford,
Connecticut 06156
Martin T. Conroy Treasurer Director, Vice President,
c/o 151 Farmington Chief Financial Officer
Avenue, Hartford, and Assistant Treasurer
Connecticut 06156
J. Neil McMurdie Counsel Assistant Secretary
c/o 151 Farmington
Avenue, Hartford,
Connecticut 06156
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APPENDIX 8
DIRECTORS AND EXECUTIVE OFFICERS OF MASSACHUSETTS FINANCIAL SERVICES COMPANY
INFORMATION REGARDING OTHER MFS ADVISED FUNDS WITH A SIMILAR OBJECTIVE.
88
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APPENDIX 9
DIRECTORS AND EXECUTIVE OFFICERS OF SCUDDER KEMPER INVESTMENTS, INC.
INFORMATION REGARDING OTHER SCUDDER ADVISED FUNDS WITH A SIMILAR OBJECTIVE
89
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APPENDIX 10
DIRECTORS AND EXECUTIVE OFFICERS OF T. ROWE PRICE ASSOCIATES, INC.
INFORMATION REGARDING OTHER T. ROWE PRICE ADVISED FUNDS WITH A SIMILAR
OBJECTIVE
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PRELIMINARY COPIES
PORTFOLIO PARTNERS, INC.
MFS CAPITAL OPPORTUNITIES PORTFOLIO
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
THIS PROXY CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR APPROVAL OF THE PROPOSALS.
Dated: __________________, 2000
Please sign exactly as name appears on this card. When the account is in
the name of joint tenants, all should sign. When signing as administrator,
trustee or guardian, please give title. If a corporation or partnership, sign
in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
91
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PRELIMINARY COPIES
PORTFOLIO PARTNERS, INC.
MFS EMERGING EQUITIES PORTFOLIO
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
THIS PROXY CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR APPROVAL OF THE PROPOSALS.
Dated: __________________, 2000
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee
or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
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PRELIMINARY COPIES
PORTFOLIO PARTNERS, INC.
MFS RESEARCH GROWTH PORTFOLIO
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
THIS PROXY CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR APPROVAL OF THE PROPOSALS.
Dated: __________________, 2000
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee
or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
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PRELIMINARY COPIES
PORTFOLIO PARTNERS, INC.
SCUDDER INTERNATIONAL GROWTH PORTFOLIO
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
THIS PROXY CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR APPROVAL OF THE PROPOSALS.
Dated: __________________, 2000
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee
or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
94
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PRELIMINARY COPIES
PORTFOLIO PARTNERS, INC
T. ROWE PRICE GROWTH EQUITY PORTFOLIO
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
THIS PROXY CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR APPROVAL OF THE PROPOSALS.
Dated: __________________, 2000
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee
or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
Signature(s)
95
<PAGE>
[THIS IS THE BACK OF EACH PROXY CARD]
Please refer to the Proxy Statement for a discussion of these matters. This
proxy card is solicited in connection with the special meeting of the
shareholders of Portfolio Partners, Inc., (the "Fund") to be held at 10:00
a.m., Eastern Time, on November 14, 2000, and at any adjournment thereof. THIS
PROXY CARD, WHEN PROPERLY EXECUTED, DIRECTS SUSAN MOSHER, J.NEIL MCMURDIE AND
ARLYN E. WHITELAW TO VOTE THE SHARES LISTED ON THE FRONT OF THIS CARD AS
DIRECTED AND REVOKES ALL PRIOR PROXY CARDS.
Please vote the shares listed on the front of this card by filling in the
appropriate box below, as shown, using blue or black ink or dark pencil. Do not
use red ink.
[ ] [box is filled in solidly] EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
1. To approve a new Investment Advisory Agreement between the Fund, on behalf
of the Portfolios, and Aetna Life Insurance and Annuity Company (ALIAC");
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve a new Sub-Advisory Agreement between MFS and ALIAC (only MFS
Capital Opportunities Portfolio, MFS Emerging Equities Portfolio and MFS
Research Growth Portfolio shareholders may vote on this proposal)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve a new Sub-Advisory Agreement between Scudder and ALIAC (only
Scudder International Growth Portfolio shareholders may vote on this proposal).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve a new Sub-Advisory Agreement between T. Rowe Price and ALIAC
(only T. Rowe Price Growth Equity Portfolio shareholders may vote on this
proposal).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve a "Manager-of-Managers" arrangement for the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS, INCLUDING ANY ADJOURNMENT OF THE MEETING, AS MAY PROPERLY COME BEFORE
THE MEETING.
96
<PAGE>
PRELIMINARY COPIES
Portfolio Partners, Inc.
MFS Capital Opportunities Portfolio
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
VARIABLE ANNUITY ACCOUNTS B, C and I
VARIABLE LIFE ACCOUNTS B AND C
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED CONTRACT HOLDER UNDER A VARIABLE
ANNUITY OR VARIABLE Life INSURANCE CONTRACT FUNDED BY A SEPARATE ACCOUNT OF
EITHER AETNA LIFE INSURANCE AND ANNUITY COMPANY OR AETNA INSURANCE COMPANY OF
AMERICA (COLLECTIVELY, "AETNA"). IF YOU DO NOT RETURN THIS AUTHORIZATION CARD,
AETNA WILL VOTE THE FUND SHARES ATTRIBUTABLE TO YOUR INTEREST IN THE SEPARATE
ACCOUNT, FOR, AGAINST, OR ABSTAINING, IN THE SAME PROPORTION AS THE SHARES FOR
WHICH VOTING INSTRUCTIONS HAVE BEEN RECEIVED FROM OTHER CONTRACT HOLDERS. IF
YOU RETURN THE AUTHORIZATION CARD BUT DO NOT MARK YOUR VOTING INSTRUCTION ON
THE REVERSE SIDE, AETNA IS INSTRUCTED TO VOTE THE INTEREST IN THE SEPARATE
ACCOUNT "FOR" THE PROPOSAL.
Please sign exactly as name appears on this card.
When the account is in the name of joint tenants, all should sign. When signing
as administrator, trustee, plan sponsor or guardian, please give title. If a
corporation or partnership, sign in entity's name and by authorized persons
X______________________
X______________________
(Signature of Contract Holder)
Dated: __________________, 2000
97
<PAGE>
PRELIMINARY COPIES
Portfolio Partners, Inc.
MFS Emerging Equities Portfolio
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
VARIABLE ANNUITY ACCOUNTS B, C and I
VARIABLE LIFE ACCOUNTS B AND C
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED CONTRACT HOLDER UNDER A VARIABLE
ANNUITY OR VARIABLE Life INSURANCE CONTRACT FUNDED BY A SEPARATE ACCOUNT OF
EITHER AETNA LIFE INSURANCE AND ANNUITY COMPANY OR AETNA INSURANCE COMPANY OF
AMERICA (COLLECTIVELY, "AETNA"). IF YOU DO NOT RETURN THIS AUTHORIZATION CARD,
AETNA WILL VOTE THE FUND SHARES ATTRIBUTABLE TO YOUR INTEREST IN THE SEPARATE
ACCOUNT, FOR, AGAINST, OR ABSTAINING, IN THE SAME PROPORTION AS THE SHARES FOR
WHICH VOTING INSTRUCTIONS HAVE BEEN RECEIVED FROM OTHER CONTRACT HOLDERS. IF
YOU RETURN THE AUTHORIZATION CARD BUT DO NOT MARK YOUR VOTING INSTRUCTION ON
THE REVERSE SIDE, AETNA IS INSTRUCTED TO VOTE THE INTEREST IN THE SEPARATE
ACCOUNT "FOR" THE PROPOSAL.
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee,
plan sponsor or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
(Signature of Contract Holder)
Dated: __________________, 2000
98
<PAGE>
PRELIMINARY COPIES
Portfolio Partners, Inc.
MFS Research Growth Portfolio
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
VARIABLE ANNUITY ACCOUNTS B, C and I
VARIABLE LIFE ACCOUNTS B AND C
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED CONTRACT HOLDER UNDER A VARIABLE
ANNUITY OR VARIABLE Life INSURANCE CONTRACT FUNDED BY A SEPARATE ACCOUNT OF
EITHER AETNA LIFE INSURANCE AND ANNUITY COMPANY OR AETNA INSURANCE COMPANY OF
AMERICA (COLLECTIVELY, "AETNA"). IF YOU DO NOT RETURN THIS AUTHORIZATION CARD,
AETNA WILL VOTE THE FUND SHARES ATTRIBUTABLE TO YOUR INTEREST IN THE SEPARATE
ACCOUNT, FOR, AGAINST, OR ABSTAINING, IN THE SAME PROPORTION AS THE SHARES FOR
WHICH VOTING INSTRUCTIONS HAVE BEEN RECEIVED FROM OTHER CONTRACT HOLDERS. IF
YOU RETURN THE AUTHORIZATION CARD BUT DO NOT MARK YOUR VOTING INSTRUCTION ON
THE REVERSE SIDE, AETNA IS INSTRUCTED TO VOTE THE INTEREST IN THE SEPARATE
ACCOUNT "FOR" THE PROPOSAL.
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee,
plan sponsor or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
(Signature of Contract Holder)
Dated: __________________, 2000
99
<PAGE>
PRELIMINARY COPIES
Portfolio Partners, Inc.
Scudder International Growth Portfolio
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
VARIABLE ANNUITY ACCOUNTS B, C and I
VARIABLE LIFE ACCOUNTS B AND C
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED CONTRACT HOLDER UNDER A VARIABLE
ANNUITY OR VARIABLE Life INSURANCE CONTRACT FUNDED BY A SEPARATE ACCOUNT OF
EITHER AETNA LIFE INSURANCE AND ANNUITY COMPANY OR AETNA INSURANCE COMPANY OF
AMERICA (COLLECTIVELY, "AETNA"). IF YOU DO NOT RETURN THIS AUTHORIZATION CARD,
AETNA WILL VOTE THE FUND SHARES ATTRIBUTABLE TO YOUR INTEREST IN THE SEPARATE
ACCOUNT, FOR, AGAINST, OR ABSTAINING, IN THE SAME PROPORTION AS THE SHARES FOR
WHICH VOTING INSTRUCTIONS HAVE BEEN RECEIVED FROM OTHER CONTRACT HOLDERS. IF
YOU RETURN THE AUTHORIZATION CARD BUT DO NOT MARK YOUR VOTING INSTRUCTION ON
THE REVERSE SIDE, AETNA IS INSTRUCTED TO VOTE THE INTEREST IN THE SEPARATE
ACCOUNT "FOR" THE PROPOSAL.
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee,
plan sponsor or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
(Signature of Contract Holder)
Dated: __________________, 2000
100
<PAGE>
PRELIMINARY COPIES
Portfolio Partners, Inc.
T. Rowe Price Growth Equity Portfolio
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PORTFOLIO PARTNERS, INC.
VARIABLE ANNUITY ACCOUNTS B, C and I
VARIABLE LIFE ACCOUNTS B AND C
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED CONTRACT HOLDER UNDER A VARIABLE
ANNUITY OR VARIABLE Life INSURANCE CONTRACT FUNDED BY A SEPARATE ACCOUNT OF
EITHER AETNA LIFE INSURANCE AND ANNUITY COMPANY OR AETNA INSURANCE COMPANY OF
AMERICA (COLLECTIVELY, "AETNA"). IF YOU DO NOT RETURN THIS AUTHORIZATION CARD,
AETNA WILL VOTE THE FUND SHARES ATTRIBUTABLE TO YOUR INTEREST IN THE SEPARATE
ACCOUNT, FOR, AGAINST, OR ABSTAINING, IN THE SAME PROPORTION AS THE SHARES FOR
WHICH VOTING INSTRUCTIONS HAVE BEEN RECEIVED FROM OTHER CONTRACT HOLDERS. IF
YOU RETURN THE AUTHORIZATION CARD BUT DO NOT MARK YOUR VOTING INSTRUCTION ON
THE REVERSE SIDE, AETNA IS INSTRUCTED TO VOTE THE INTEREST IN THE SEPARATE
ACCOUNT "FOR" THE PROPOSAL.
Please sign exactly as name appears on this card. When the account is in the
name of joint tenants, all should sign. When signing as administrator, trustee,
plan sponsor or guardian, please give title. If a corporation or partnership,
sign in entity's name and by authorized persons.
X______________________
X______________________
(Signature of Contract Holder)
Dated: __________________, 2000
101
<PAGE>
THIS IS THE BACK OF EACH AUTHORIZATION CARD
Please refer to the Proxy Statement for a discussion of these matters. This
authorization card is solicited in connection with the special meeting of the
shareholders of Portfolio Partners, Inc. (the "Fund") to be held at 10:00 a.m.,
Eastern Time, on November 14, 2000, and at any adjournment thereof (the
"Special Meeting"). THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED, DIRECTS
SUSAN MOSHER, J. NEIL MCMURDIE AND ARLYN WHITELAW TO VOTE THE INTEREST OF THE
CONTRACT HOLDER(S) SIGNING ON THE FRONT SIDE OF THIS CARD IN THE SHARES OF THE
FUND HELD IN THE SEPARATE ACCOUNT AT THE SPECIAL MEETING AND AT ANY ADJOURNMENT
THEREOF IN THE MANNER DIRECTED BELOW WITH RESPECT TO THE MATTERS DESCRIBED IN
THE NOTICE AND ACCOMPANYING PROXY STATEMENT FOR SAID MEETING AND REVOKES ALL
PRIOR AUTHORIZATION CARDS.
Please vote the shares listed on the front of this card by filling in the
appropriate box below, as shown, using blue or black ink or dark pencil. Do not
use red ink.
[ ] [box is filled in solidly] EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH PROPOSAL.
1. To approve a new Investment Advisory Agreement between the Fund, on behalf
of the Portfolios, and Aetna Life Insurance and Annuity Company (ALIAC");
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve a new Sub-Advisory Agreement between MFS and ALIAC (only MFS
Capital Opportunities Portfolio, MFS Emerging Equities Portfolio and MFS
Research Growth Portfolio shareholders may vote on this proposal)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve a new Sub-Advisory Agreement between Scudder and ALIAC (only
Scudder International Growth Portfolio shareholders may vote on this
proposal).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve a new Sub-Advisory Agreement between T. Rowe Price and ALIAC
(only T. Rowe Price Growth Equity Portfolio shareholders may vote on this
proposal).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve a "Manager-of-Managers" arrangement for the Fund.
102
<PAGE>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS, INCLUDING ANY ADJOURNMENT OF THE MEETING, AS MAY PROPERLY COME BEFORE
THE MEETING.
103
