As filed with the Securities and Exchange Commission
on June 14, 1996
Registration Nos. 33-12723
811-5062
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 11 [X]
(Check appropriate box or boxes.)
AETNA GET FUND
-------------------------------------------------
(Exact name of registrant as specified in charter)
151 Farmington Avenue
Hartford, CT 06156-8962
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (860) 273-7834
Susan Bryant, Esq.
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4C
Hartford, CT 06156-8962
(Name and Address of Agent For Service)
Copies to:
Raymond A. O'Hara III, Esq.
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) pursuant to paragraph (a)(1)
_X_ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Investment Company Act
Rule 24f-2 and the Rule 24f-2 Notice for Registrant's fiscal year 1995 was filed
on February 29, 1996.
AETNA GET FUND
CROSS REFERENCE SHEET
(as required by Rule 404 (c))
<TABLE>
<CAPTION>
<S> <C> <C>
Part A
N-1A
Item No. Location
1. Cover Page........................... Cover Page
2. Synopsis............................. Summary
3. Condensed Financial Information...... Not Applicable
4. General Description of Registrant.... Cover Page; The Fund;
Description of Series C;
Investment Techniques,
Risk Factors and Other
Considerations
5. Management of the Fund............... Management of the Fund
5A. Management's Discussion of Fund
Performance...... Not Applicable
6. Capital Stock and Other Securities... General Information; Sale
and Redemption of Shares;
Net Asset Value; Distribu-
tions and Tax Status
7. Purchase of Securities Being Offered. Management of the Fund;
Net Asset Value; Sale and
Redemption of Shares
8. Redemption or Repurchase............. Sale and Redemption of
Shares; Net Asset Value
9. Pending Legal Proceedings............ Not Applicable
Part B
10. Cover Page........................... Cover Page
11. Table of Contents.................... Table of Contents
12. General Information and History...... General Information
and History
13. Investment Objectives and Policies... Investment Objective and
Restrictions; Description
of Various Securities and
Investment Techniques; The
Asset Allocation Process
14. Management of the Fund............... Trustees and Officers
of the Trust
15. Control Persons and Principal Holders Control Persons and
of Securities...................... Principal Shareholders
16. Investment Advisory and Other The Investment Advisory
Services........................... Agreement; Subadvisory
Agreement; The Adminis-
trative Services Agreement;
Independent Auditors;
Custodian
17. Brokerage Allocation and Other Brokerage Allocation and
Practices.......................... Trading Practices
18. Capital Stock and Other Securities... Description of Shares;
Voting Rights
19. Purchase, Redemption and Pricing of Net Asset Value; Sale
Securities Being Offered........... and Redemption of Shares
20. Tax Status........................... Tax Status
21. Underwriters......................... Principal Underwriter
22. Calculation of Performance Data..... Not Applicable
23. Financial Statements................. Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
PART A
PRELIMINARY PROSPECTUS DATED:
AETNA GET FUND
Series C Shares
151 Farmington Avenue, Hartford, CT 06156-8962, 1-800-525-4225
Prospectus dated: September __, 1996
Aetna GET Fund (Trust or Fund) is a diversified, open-end management investment
company organized as a Massachusetts Business Trust and authorized to issue
multiple series of shares. Series C shares will be offered from September 15,
1996 through December 15, 1996, the "Offering Period." Series C will be offered
as a funding option under certain variable annuity contracts (Contracts) issued
by Aetna Life Insurance and Annuity Company.
This Prospectus sets forth concisely the information about the Trust and Series
C that you ought to know before investing. Additional information about the
Trust and Series C is contained in a Statement of Additional Information (SAI)
dated _______, 1996, which has been filed with the Securities and Exchange
Commission (Commission) and is incorporated herein by reference. The SAI is
available, without charge, by writing to the Trust at the address listed above
or by calling 1-800-525-4225.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the securities of Series C in any jurisdiction in which such sale,
offer to sell, or solicitation may not be lawfully made.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this Prospectus carefully before investing and retain it for future
reference.
TABLE OF CONTENTS
Page
SUMMARY ......................................................................
DESCRIPTION OF SERIES C........................................................
Investment Objective..................................................
Investment Policy.....................................................
Special Considerations................................................
Other Considerations..................................................
Equity Component......................................................
Fixed Component.......................................................
INVESTMENT TECHNIQUES, RISK FACTORS AND OTHER CONSIDERATIONS...................
General Considerations................................................
Asset-Backed Securities...............................................
Options, Futures and Other Derivative Instruments.....................
High Risk, High-Yield Securities......................................
Industry Concentration................................................
Foreign Securities....................................................
Mortgage-Backed Securities............................................
Repurchase Agreements.................................................
Securities Lending....................................................
Borrowing.............................................................
Illiquid and Restricted Securities....................................
Depositary Receipts...................................................
Variable Rate Instruments, When-Issued and Delayed Delivery
Transactions.......................................................
Proprietary Software..................................................
Portfolio Turnover....................................................
MANAGEMENT OF THE FUND.........................................................
Trustees .............................................................
Investment Adviser....................................................
Sub-Adviser...........................................................
Portfolio Management and Performance..................................
Expenses and Trust Administration.....................................
GENERAL INFORMATION............................................................
Declaration of Trust..................................................
Capital Stock.........................................................
Shareholder Meetings..................................................
Voting Rights.........................................................
DISTRIBUTIONS AND TAX STATUS...................................................
SALE AND REDEMPTION OF SHARES..................................................
NET ASSET VALUE................................................................
SUMMARY
1. Investment Objective
The goal of Series C is to achieve maximum total return without
compromising a minimum targeted rate of return by participating in favorable
equity market performance during the Guaranteed Period from December 16, 1996
through December 15, 2001, the Maturity Date. (See "Description of Series C
Investment Objective.")
2. Investment Strategy
The Series C assets will be invested entirely in money market instruments
prior to December 16, 1996. After that date, the assets will be allocated
between equities and fixed income securities. The equities will consist
principally of common stocks, preferred stocks and convertible securities. The
fixed income securities will consist primarily of short-to-intermediate-term
debt securities. Series C may also invest in other types of equity securities
and debt securities and in options, futures and other derivative instruments.
(See "Description of Series C - Investment Policy.")
3. Risks
- The performance of Series C depends on the value of its holdings. Stock
values fluctuate in response to the activities of individual companies, and
general market and economic conditions. In the short term, stock prices can
fluctuate dramatically in response to these factors.
- Bond values fluctuate based on changes in interest rates, and in the
credit quality of the issuer. Lower-rated bonds may be particularly sensitive to
these factors.
- Investments in foreign securities involve risks that are in addition to
those of U.S. investments, including increased political and economic risk, as
well as exposure to currency fluctuations.
- Derivative instruments can involve greater risk and may be less liquid
and more volatile than conventional instruments.
- Consistent with the minimum targeted rate of return, a portion of the
assets of Series C is invested in fixed income securities; therefore Series C
may not participate as fully in upward equity market movements as other equity
funds.
(See "Investment Techniques, Risk Factors and Other Considerations.")
4. Investment Adviser and Sub-Adviser
Aetna Life Insurance and Annuity Company ("ALIAC" or the "Investment
Adviser") is the Investment Adviser for the Trust. ALIAC has engaged Aeltus
Investment Management, Inc. ("Aeltus" or the "Sub-Adviser") as the sub-adviser
to Series C. ALIAC and Aeltus are indirect wholly-owned subsidiaries of Aetna
Life and Casualty Company ("Aetna") which, with affiliated companies, is one of
the world's largest insurance and financial services organization. ALIAC and
other Aetna affiliated companies provide world-wide investment management and
administrative services on over $_____ billion of assets. (See "Management of
the Fund - Investment Adviser" and "Sub-Adviser.")
DESCRIPTION OF SERIES C
Investment Objective
Series C seeks to achieve maximum total return without compromising a minimum
targeted rate of return (Targeted Return) by participating in favorable equity
market performance during the "Guaranteed Period" from December 16, 1996 through
December 15, 2001, the "Maturity Date" of Series C. To achieve this objective,
the Series C assets (Assets) will be allocated beginning December 16, 1996,
between equities and fixed income securities in a changing mix. Prior to
December 16, 1996, the Assets will be invested entirely in money market
instruments. Assuming interest rates on December 16, 1996 are identical to
interest rates as of the date of this Prospectus, then the Assets will be
allocated approximately __% to equities and __% to fixed income securities at
the beginning of the Guaranteed Period.
The minimum targeted rate of return (Targeted Return) is 2.50% per year over the
Guaranteed Period. Please refer to your Contract prospectus for additional
information on ALIAC and the ALIAC Guarantee.
ALIAC reserves the right to refuse additional deposits during the Offering
Period if the Assets exceed $400 million. Furthermore, if Series C has less than
$75 million of Assets by the end of the Offering Period, ALIAC reserves the
right to discontinue Series C. ALIAC also reserves the right to continue to
accept deposits during the Guaranteed Period (see "Other Considerations").
Series C has adopted an investment objective which is a fundamental policy and
may not be changed without the approval by holders of a majority of outstanding
shares. There can be no assurance that Series C will meet its investment
objective but it will follow the investment approach described in the Investment
Policy section. Series C is subject to additional investment restrictions
described in the Statement of Additional Information (SAI). To the extent those
restrictions are fundamental policies, they cannot be changed without the vote
of a majority of outstanding shares.
Investment Policy
Prior to December 16, 1996, the Assets will be invested entirely in money market
instruments. Beginning December 16, 1996, ALIAC will allocate Series C Assets
daily between a portfolio consisting primarily of equities and one consisting of
fixed income securities (Equity Component and Fixed Component, respectively) in
proportions that will not compromise Series C's minimum targeted rate of return.
ALIAC uses proprietary computer programs on a daily basis to determine the
percentage of Assets which may be allocated between the Fixed Component and the
Equity Component. Generally, as the value of the Equity Component rises, more
Assets are allocated to the Equity Component. As the value of the Equity
Component declines, more Assets are allocated to the Fixed Component.
ALIAC, with the assistance of the proprietary software programs, reallocates
assets as needed between the Equity Component and the Fixed Component so that if
the value of the Equity Component were to decline by 30% in a single day, a
complete reallocation to the Fixed Component might occur to ensure that the
minimum targeted rate of return would be achieved at the end of the Guaranteed
Period. While the performance of the Equity Component may be better or worse
than the performance of major stock market indices such as the Dow Jones
Industrial Average and the Standard and Poor's 500 Stock Index, neither of those
indices has declined as much as 30% in a single day since 1929. There can be no
assurance that a decline of 30% or more will not occur during the Guaranteed
Period. (For a further description of the asset allocation process, please see
"The Asset Allocation Process" in the SAI.)
Special Considerations
If during the Guaranteed Period of Series C the equity markets rise, the Assets
may become largely invested in the Equity Component, as the likelihood of not
realizing the minimum targeted rate of return would be low. Conversely, if
during this same period the equity markets experienced a general decline, the
Assets may become largely invested in the Fixed Component in order to increase
the likelihood of achieving the minimum targeted rate of return at the Maturity
Date.
The amount of Assets invested in the Fixed Component will increase or decrease
depending upon a number of factors, including but not limited to the current
value of the Equity Component. Use of the Fixed Component reduces Series C's
ability to participate as fully in upward equity market movements, and therefore
represents some loss of opportunity, or opportunity cost, compared to a fund
which is fully invested in equities. In addition, a major decline in the equity
markets, particularly a decline well before the Maturity Date, could cause the
Assets to be fully invested in the Fixed Component. Were this to happen, it is
unlikely that there would be a meaningful reallocation of the Assets into the
Equity Component, even if there were significant upward movement in the equity
markets.
Other Considerations
If Series C Assets do not reach $75 million at the end of the Offering Period,
the Board of Trustees reserves the right not to operate Series C in accordance
with its Investment Objectives and Policies. In that event, ALIAC will notify
Contract owners within 15 days after the end of the Offering Period that Series
C is being discontinued and they will have 45 days following the end of the
Offering Period to transfer their money from Series C. If at the end of the 45
day period, no election is made, all Series C Contract values will be
transferred to Aetna Variable Encore Fund, a money market fund. Please note:
Assets will be invested in money market instruments during this 45 day period.
In the event Assets reach or exceed $400 million during the Offering Period,
ALIAC reserves the right to prohibit future deposits to Series C. If this
decision is made, ALIAC will notify Series C's distributors that deposits
received more than 10 calendar days after such notification has been sent will
be returned to the distributor. Only those deposits post-marked or received on
or before the date of notification will be accepted. In the event future
deposits are prohibited, the Guaranteed Period will still not commence until its
scheduled date of December 16, 1996.
In addition, ALIAC reserves the right to continue to accept additional deposits,
including both new annuity monies and internal variable annuity transfers,
during the Guaranteed Period and to discontinue these deposits at its discretion
at any time. In the event of any extraordinary or unusual market conditions such
as a sudden, abrupt drop in the equity market and/or abrupt rise in the bond
market that, in ALIAC's opinion, could jeopardize the attainment of the Targeted
Return, ALIAC could immediately cease to accept additional deposits into the
Fund and would notify distributors and existing variable annuity customers of
this decision immediately. If the decision to cease accepting additional
deposits is made, ALIAC would accept into the Fund only those deposits which
had been received in good order and deposited into the separate account prior
to the decision to disallow additional deposits. Conversely, during
normal market conditions so determined by ALIAC, ALIAC will notify its
distributors and existing variable annuity customers of its decision
to close the Fund to new deposits and will allow additional deposits received no
more than 10 days from the date of notification into the Fund provided market
conditions remain normal during these 10 days. Once the decision to close the
Fund to new deposits has been made, the Fund may not reopen for new deposits.
Equity Component
With the Equity Component, ALIAC seeks to maximize total return through
investment in a diversified portfolio of common and preferred stocks and
securities convertible into common and preferred stocks believed to offer
above-average growth potential. It is anticipated that capital appreciation and
investment income will both be major factors in achieving total return.
The Equity Component may also invest to a limited extent in non-convertible
preferred stocks, debt securities, rights and warrants. The Equity Component may
engage, within specified limits, in the lending of portfolio securities, in the
writing and repurchase of covered call options, in the buying and disposal of
covered put options, in the buying and selling of stock index futures contracts
and options thereon, and in the buying and selling of equity-based stock index
options for hedging purposes. The Equity Component may maintain a moderate
reserve of cash and high-grade short-term debt securities and may invest in
foreign securities and when-issued and delayed- delivery securities. When
near-term equity market prospects are deemed unfavorable, the Equity Component
may place a larger proportion of its investments in high-grade, short-term debt
instruments, convertible securities, and common stocks of companies in what are
perceived to be relatively stable industries. Both the Equity and Fixed
Components may borrow money from a bank for temporary or emergency purposes.
Fixed Component
The Fixed Component seeks to provide values which, together with the value of
the Equity Component at any given time, will enable Series C to achieve the
Targeted Return at the Maturity Date. The Fixed Component will be managed so
that its financial characteristics will, at any point in time, closely resemble
those of a portfolio of zero coupon bonds which mature on the Maturity Date.
Because the Fixed Component can be invested in a variety of debt securities, as
described below, the Fixed Component will provide somewhat greater opportunities
and risks than if invested solely in United States Government securities.
However, ALIAC will not make or retain investments for the Fixed Component which
appear in ALIAC's judgment to present significant credit risks.
The Fixed Component of Series C will at any time consist primarily of short-to
intermediate-term debt securities, with the length to maturity decreasing as
Series C nears its Maturity Date. Through investment in a diversified portfolio
of such debt securities, Series C seeks to maximize total return for the Fixed
Component.
The Fixed Component will primarily consist of:
(1) Corporate obligations which are rated at the time of purchase within
the four highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A
or Baa) or Standard & Poor's Corporation (AAA, AA, A or BBB);
(2) Securities of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities;
(3) Obligations of, or guaranteed by, national or state banks or bank
holding companies, which either are rated in the four highest ratings assigned
by Fitch Investors Services, Inc. (AAA, AA, A or BBB), or, if not so rated, are
considered by ALIAC to have investment quality comparable to securities which
may be purchased under (1) above;
(4) Domestic bank certificates of deposit of banks having assets (as most
recently reported) in excess of one billion dollars;
(5) Domestic bankers' acceptances eligible for discounting at the Federal
Reserve System; and
(6) Commercial paper rated A-1 by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc. Where yield disparities in the market warrant
it, Series C may acquire commercial paper rated A-2 or P-2.
Both the Fixed and Equity Components may invest in debt securities with equity
features, including convertibles, and straight debt securities rated below
BBB/Baa but not lower than B, which are high risk, high yield securities or
"junk bonds." These securities will not exceed 15% of Series C's total Assets.
For further information on high risk, high yield securities please see
"Investment Techniques, Risk Factors and Other Considerations."
The Fixed Component may also engage in the lending of portfolio securities and
may purchase debt securities on a when-issued basis. Repurchase agreements with
domestic banks and broker-dealers meeting creditworthiness standards approved by
the Trust's Board of Trustees may also be considered for investment.
The relative size of the Fixed Component's investments in any grade or type of
securities will vary from time to time depending on a number of factors,
including yields for such securities, their market supply and general economic
outlook. There can be no assurance that the Fixed Component will show a positive
return.
INVESTMENT TECHNIQUES, RISK FACTORS AND OTHER CONSIDERATIONS
General Considerations
The different types of securities purchased and investment techniques used by
Series C involve varying amounts of risk. For example, equity securities are
subject to a decline in the stock market or in the value of the issuer, and
preferred stocks have price risk and some interest rate and credit risk. The
value of debt securities may be affected by changes in general interest rates
and in the creditworthiness of the issuer. Debt securities with longer
maturities (for example, over ten years) are generally more affected by changes
in interest rates and provide less price stability than securities with short
term maturities (for example, one to ten years). Also, on each debt security,
the risk of principal and interest default is greater with higher-yielding,
lower-grade securities. High risk, high-yield securities may provide a higher
return but with added risk. In addition, foreign securities have various risks,
including currency risk. Some of the risks involved in the securities acquired
by Series C are discussed in this section. Additional discussion is contained
in the SAI.
Asset-Backed Securities
Series C may purchase securities collateralized by a specified pool of assets,
including, but not limited to, credit card receivables, automobile loans, home
equity loans, mobile home loans, or recreational vehicle loans. These securities
are subject to prepayment risk. In periods of declining interest rates,
reinvestment of prepayment proceeds would be made at lower and less attractive
interest rates.
Options, Futures and Other Derivative Instruments
A derivative is a financial instrument, the value of which is "derived" from the
performance of an underlying asset (such as a security or index of securities).
Derivatives include, but are not limited to, futures, options and forward
contracts.
Series C may engage in various strategies using derivatives including managing
its exposure to changing interest rates, securities prices and currency exchange
rates (collectively known as hedging strategies), or increasing its investment
return. For purposes other than hedging, Series C will invest no more than 5% of
its total assets in derivatives which at the time of purchase are considered to
involve high risk to Series C.
Series C may buy and sell options contracts including index options and options
on foreign securities. There is no limit on the amount of Series C's total
assets that may be subject to call options; however, writing a put option
requires the segregation of liquid assets to cover the contract. Series C will
not write a put option if it will require more than 50% of the Series' net
assets to be segregated to cover the put obligation nor will it write a put
option if after it is written more than 3% of the Series' assets would consist
of put options.
Investments in futures contracts and related options with respect to foreign
currencies, fixed income securities and foreign stock indices may also be made
by Series C. Although these investments are primarily made to hedge against
price fluctuations, in some cases, Series C may buy a futures contract for the
purpose of increasing its exposure in a particular asset class or market
segment, which strategy may be considered speculative. This strategy is
typically used to manage better portfolio transaction costs. With respect to
futures contracts or related options that may be entered into for speculative
purposes, the aggregate initial margin for futures contracts and premiums for
options will not exceed 5% of Series C's net assets, after taking into account
realized profits and unrealized losses on such futures contracts.
Series C may invest in forward contracts on foreign currency ("forward exchange
contracts"). These contracts may involve "cross-hedging," a technique in which
the Series hedges with currencies which differ from the currency in which the
underlying asset is denominated.
Series C may also invest in interest rate swap transactions. Interest rate swaps
are subject to credit risks (if the other party fails to meet its obligations)
and also interest rate risks, because Series C could be obligated to pay more
under its swap agreements than it receives under them as a result of interest
rate changes.
Derivatives can be volatile investments and involve certain risks. Series C may
be unable to limit its losses by closing a position due to lack of a liquid
market or similar factors. Losses may also occur if there is not a perfect
correlation between the value of futures or forward contracts and the related
securities. The use of futures may involve a high degree of leverage because of
low margin requirements. As a result, small price movements in futures contracts
may result in immediate and potentially unlimited gains or losses to Series C.
Leverage may exaggerate losses of principal. The amount of gains or losses on
investments in futures contracts depends on the Investment Adviser's ability to
predict correctly the direction of stock prices, interest rates and other
economic factors.
The use of forward exchange contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a foreign
currency. In an attempt to limit its risk in forward exchange contracts, Series
C limits its exposure to the amount of its assets denominated in the foreign
currency being cross-hedged. Cross-hedging entails a risk of loss on both the
value of the security that is the basis of the hedge and the currency contract
that was used in the hedge. These risks are described in greater detail in the
SAI.
Options are used to minimize principal fluctuation or to generate additional
premium income but they do involve risks. Writing covered call options, for
example, involves the risk of not being able to effect closing transactions at a
favorable price or to participate in the appreciation of the underlying
securities. Purchasing covered put options involves the risk of losing the
entire purchase price of the option.
High Risk, High-Yield Securities
Series C may invest in high risk, high-yield securities, often called "junk
bonds". These securities tend to offer higher yields than investment-grade bonds
because of the additional risks associated with them. These risks include: a
lack of liquidity; an unpredictable secondary market; a greater likelihood of
default; increased sensitivity to difficult economic and corporate developments;
call provisions which may adversely affect investment returns; and loss of the
entire principal and interest. Although junk bonds are high risk investments,
the Investment Adviser may purchase these securities if they are thought to
offer good value. This may happen if, for example, the rating agencies have, in
the Investment Adviser's opinion, misclassified the bonds or overlooked the
potential for the issuer's enhanced creditworthiness.
Industry Concentration
Series C will not concentrate its investments in any one industry, except that
Series C may invest up to 25% of its total assets in securities issued by
companies principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end users of their services, such as automobile finance,
computer finance and consumer finance. This limitation will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities.
Additionally, Series C will not invest more than 5% of its total assets in the
securities of any one issuer (excluding securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) or purchase more than 10%
of the outstanding voting securities of any one issuer. This restriction
applies only to 75% of Series C's total assets. See the SAI for additional
restrictions.
Foreign Securities
Investments in securities of foreign issuers or securities denominated in
foreign currencies involve risks not present in domestic markets. Such risks
include: currency fluctuations and related currency conversion costs; less
liquidity; price or income volatility; less government supervision and
regulation of foreign stock exchanges, brokers and listed companies; possible
difficulty in obtaining and enforcing judgments against foreign entities;
adverse foreign political and economic developments; different accounting
procedures and auditing standards; the possible imposition of withholding taxes
on interest income payable on securities; the possible seizure or
nationalization of foreign assets; the possible establishment of exchange
controls or other foreign laws or restrictions which might adversely affect the
payment and transferability of principal, interest and dividends on securities;
higher transaction costs; possible settlement delays; and less publicly
available information about foreign issuers.
Mortgage-Backed Securities
Series C may invest in mortgage-backed and other pass-through securities.
Payments of interest and principal on these securities may be guaranteed by an
agency or instrumentality of the U.S. government such as the Government National
Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC)
and the Federal National Mortgage Association (FNMA). These securities represent
part ownership of a pool of mortgage loans and principal is scheduled to be paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. Series C may also invest in mortgage pass-through securities
backed by pools of conventional fixed-rate or adjustable-rate mortgage loans. In
addition, Series C may invest in collateralized mortgage obligations (CMOs) and
securities issued by real estate mortgage investment conduits (REMICs).
Mortgage-backed securities are also subject to the same prepayment risk as
asset-backed securities.
Repurchase Agreements
Under a repurchase agreement, Series C may acquire a debt instrument for a
relatively short period subject to an obligation by the seller to repurchase and
by Series C to resell the instrument at a fixed price and time. Series C may
enter into repurchase agreements with domestic banks and broker-dealers. Such
agreements, although fully collateralized, involve the risk that the seller of
the securities may fail to repurchase them. In that event, Series C may incur
costs in liquidating the collateral or a loss if the collateral declines in
value. If the default on the part of the seller is due to insolvency and the
seller initiates bankruptcy proceedings, the ability of Series C to liquidate
the collateral may be delayed or limited. The Board of Trustees has established
credit standards for repurchase transactions entered into by Series C.
Securities Lending
Series C may lend its portfolio securities; however, the value of the loaned
securities (together with all other assets that are loaned, including those
subject to repurchase agreements) may not exceed one-third of Series C's total
assets. Series C will not lend portfolio securities to affiliates. Though
fully collateralized, lending portfolio securities involves certain risks,
including the possibility that the borrower may become insolvent or default on
the loan. In the event of a disparity between the value of the loaned security
and the collateral, there is the additional risk that the borrower may fail to
return the securities or provide additional collateral.
Borrowing
Series C may borrow money from banks, but only for temporary or emergency
purposes in an amount up to 15% of the value of Series C's total assets
(including the amount borrowed), valued at the lesser of cost or market, less
liabilities (not including the amount borrowed), at the time the borrowing is
made. When borrowings exceed 5% of Series C's total assets, Series C will not
make additional investments.
Series C does not intend to borrow for leveraging purposes. It has the authority
to do so, but only if, after the borrowing, the value of Series C's net assets,
including proceeds from the borrowings, is equal to at least 300% of all
outstanding borrowings. Leveraging can increase the volatility of Series C since
it exaggerates the effects of changes in the value of the securities purchased
with the borrowed funds.
Illiquid and Restricted Securities
Series C may invest up to 15% of its total assets in illiquid securities.
Illiquid securities are securities that are not readily marketable or cannot be
disposed of promptly within seven days and in the ordinary course of business
without taking a materially reduced price. In addition, Series C may invest in
securities that are subject to legal or contractual restrictions on resale,
including securities purchased under Rule 144A and Section 4(2) of the
Securities Act of 1933.
Because of the absence of a trading market for illiquid and certain restricted
securities, it may take longer to liquidate these securities than it would
unrestricted, liquid securities. Series C may realize less than the amount
originally paid by Series C for the security. The Board of Trustees has
established a policy to monitor the liquidity of such securities.
Depositary Receipts
Series C can invest in depositary receipts which are negotiable certificates
evidencing ownership of shares of a non-U.S. corporation, government, or foreign
subsidiary of a U.S. corporation. A U.S. bank typically issues depositary
receipts, which are backed by ordinary shares that remain on deposit with a
custodian bank in the issuer's home market. A depositary receipt can either be
"sponsored" by the issuing company or established without the involvement of the
company, which is referred to as "unsponsored." Unsponsored depositary receipts,
which are typically traded in the over-the-counter market, may be less liquid
than sponsored depositary receipts and therefore may involve more risk. In
addition, there may be less information available about issuers of unsponsored
depositary receipts.
Series C will generally acquire American Depositary Receipts ("ADRs") which are
dollar denominated, although their market price is subject to fluctuations of
the foreign currency in which the underlying securities are denominated. All
depositary receipts will be considered foreign securities for purposes of Series
C's investment limitation concerning investment in foreign securities.
See the SAI for more information.
Variable Rate Instruments, When-Issued and Delayed Delivery Transactions
A variable rate instrument is an instrument which provides for the adjustment of
its interest rate on set dates and which can reasonably be expected to have a
market value close to par value. A when-issued transaction is one that is made
as of a current date, but conditioned on the actual issuance of a security that
is authorized but not yet issued. A delayed-delivery transaction is one where
both parties agree that the security will be delivered and the transaction
completed at a future date.
When-issued, delayed-delivery and variable rate instruments may be subject to
liquidity risks and risks of loss of principal due to market fluctuations.
Series C will establish a segregated account in which it will maintain liquid
assets in an amount at least equal to Series C's commitments to purchase
securities on a when-issued or delayed-delivery basis. For more information
about these securities, see the SAI.
Proprietary Software
The proprietary software programs will consider factors such as current interest
rates, estimated transaction costs, time to Maturity Date and market volatility
based on experience and historical market performance to determine the Asset mix
between the Equity and Fixed Components. This software is not used to select
particular securities or to predict market performance.
Portfolio Turnover
Portfolio turnover refers to the frequency of portfolio transactions and the
percentage of portfolio assets being bought and sold in the aggregate during the
year. Although Series C does not purchase securities with the intention of
profiting from short-term trading, it may buy and sell securities when the
Investment Adviser (or Sub-Adviser) believes such action is advisable. It is
anticipated that the average annual turnover rate of Series C may exceed 125%.
Turnover rates in excess of 125% may result in higher transaction costs (which
are borne directly by Series C) and a possible increase in short-term capital
gains (or losses). See "Tax Status" in the SAI.
MANAGEMENT OF THE FUND
Trustees
The operations of Series C are managed under the direction of the Board of
Trustees (Trustees). The Trustees set broad policies for Series C. Information
about the Trustees of the Trust is found in the SAI.
Investment Adviser
ALIAC serves as the Investment Adviser for Series C. ALIAC is a Connecticut
insurance corporation with its principal offices at 151 Farmington Avenue,
Hartford, Connecticut 06156, and is registered with the SEC as an investment
adviser. As of March 31, 1996, ALIAC managed over $22 billion in assets. The
Investment Adviser is a wholly-owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn, a wholly-owned subsidiary of Aetna Retirement Services,
Inc., which is in turn a direct wholly-owned subsidiary of Aetna Life and
Casualty Company.
Under the terms of the Investment Advisory Agreement between the Trust and ALIAC
with respect to Series C, ALIAC, subject to the supervision of the Trustees, is
obligated to manage and oversee the Trust's day-to-day operations and to manage
the investments of Series C.
The Investment Advisory Agreement gives the Investment Adviser broad latitude in
selecting securities for Series C subject to the Trustees' oversight. Under the
Investment Advisory Agreement, the Investment Adviser may delegate to a
subadviser its functions in managing the investments of Series C, subject to the
Investment Adviser's oversight. The Investment Advisory Agreement allows the
Investment Adviser to place trades through brokers of its choosing and to take
into consideration the quality of the brokers' services and execution, as well
as services such as research, providing equipment to the Trust, or paying Trust
expenses, in setting the amount of commissions paid to a broker. The Investment
Adviser will only use these commissions for services and expenses to the extent
authorized by applicable law and by the rules and regulations of the SEC. The
Investment Adviser receives a monthly fee from Series C of .60% of the average
daily net assets of Series C during the Guaranteed Period and of .25% of the
average daily net assets of Series C during the Offering Period.
Under the Investment Advisory Agreement, the Investment Adviser has agreed to
reduce its fee or reimburse Series C if the expenses borne by Series C would
exceed the expense limitations of any jurisdiction in which Series C's shares
are qualified for sale. The Investment Adviser is not obligated to reimburse
Series C for any expenses which exceed the amount of its advisory fee for that
year. The Investment Advisory Agreement also provides that the Investment
Adviser is responsible for all of its own costs including costs of the
Investment Adviser's personnel required to carry out its investment advisory
duties.
Sub-Adviser
The Fund and ALIAC have engaged Aeltus as Sub-Adviser of Series C of the Fund.
Aeltus is a Connecticut corporation with its principal offices located at 242
Trumbull Street, Hartford, Connecticut 06103-1205. Aeltus is also an indirect
wholly owned subsidiary of Aetna Retirement Services, Inc. Aeltus is
registered as an investment adviser with the SEC. All of the current
investment personnel of ALIAC will assume comparable positions with Aeltus as
of August 1, 1996 and will provide investment services to the Fund.
Under the Subadvisory Agreement, Aeltus is responsible for managing the assets
of Series C of the Fund in accordance with Series C's investment objective and
policies subject to the supervision of ALIAC, the Fund and the Fund's Trustees.
Aeltus determines what securities and other instruments are purchased and sold
by Series C of the Fund and handles certain related accounting and
administrative functions, including determining Series C's net asset value on a
daily basis and preparing and providing such reports, data and information as
ALIAC or the Trustees request from time to time.
ALIAC has overall responsibility for monitoring the investment program
maintained by the Sub-Adviser for compliance with applicable laws and
regulations, and Series C's investment objective and policies.
The Subadvisory Agreement gives Aeltus broad latitude in selecting securities
for Series C subject to the Investment Adviser's oversight. The Agreement also
allows Aeltus to place trades through brokers of its choosing and to take into
consideration the quality of the brokers' services and execution, as well
as services such as research and providing equipment or paying Trust expenses,
in setting the amount of commissions paid to a broker. The use of research and
expense reimbursements in determining and paying commissions is referred to as
"soft dollar" practices. Aeltus will only use soft dollars for services and
expenses to the extent the Investment Adviser is authorized to do so under the
Investment Advisory Agreement, but only as authorized by applicable law and the
rules and regulations of the SEC.
The Subadvisory Agreement provides that the Investment Adviser will pay Aeltus a
fee at an annual rate of up to .375% of the average daily net assets of Series
C. This fee is not charged back to, or paid by, Series C; it is paid by the
Investment Adviser out of its own resources, including fees and charges it
receives from or in connection with Series C.
The Subadvisory Agreement requires Aeltus to reduce its fee if the Investment
Adviser is required to reduce its fee under the Investment Advisory Agreement.
The Investment Adviser has agreed to reduce its fee or reimburse Series C if the
expenses borne by Series C would exceed the expense limitations of any
jurisdiction in which Series C's shares are qualified for sale. The Investment
Adviser would not be obligated to reimburse Series C for any expenses which
exceed the amount of its advisory fee for that year. The Subadvisory Agreement
obligates Aeltus to reduce its fee by 60% of the amount of the Investment
Adviser's fee reduction.
Portfolio Management and Performance
The following individual is primarily responsible for the day-to-day management
of Series C.
Kevin M. Means is the portfolio manager for Series C. Mr. Means, a Managing
Director of Aeltus from August 1, 1996 to present, joined ALIAC in July of 1994
after serving as Chief Investment Officer at INVESCO Management and Research,
Boston from 1993 to 1994. He also served from 1987 to 1993 as the Director of
Quantitative Research and Equity Portfolio Manager at INVESCO Capital
Management, Atlanta. At INVESCO, Mr. Means managed mutual funds and
institutional accounts.
GET Series "A" Performance
The following shows in tabular form the graph which appears here:
(000s omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GET A S&P 500 Lehman Aggregate
Aug - 87 10.00 10.00 10.00
Nov - 87 10.08 7.97 10.08
Feb - 88 10.88 8.19 10.65
May - 88 11.11 8.40 10.61
Aug - 88 11.37 8.82 10.71
Nov - 88 11.58 9.14 11.18
Feb - 89 12.15 9.83 11.22
May - 89 12.70 10.32 11.42
Aug - 89 13.88 11.64 12.33
Nov - 89 13.91 11.55 12.51
Feb - 90 13.77 11.18 12.51
May - 90 13.97 11.41 12.42
Aug - 90 15.19 12.40 13.14
Nov - 90 13.60 10.69 13.29
Feb - 91 15.10 12.20 13.96
May - 91 16.54 13.42 14.33
Aug - 91 16.59 13.99 14.61
Nov - 91 16.94 14.26 15.39
Feb - 92 17.94 14.97 15.78
May - 92 18.01 15.31 15.91
Aug - 92 18.39 15.77 16.77
Nov - 92 18.47 15.69 16.91
</TABLE>
The above graph reflects the results of a $10,000 investment in Series A of the
Aetna GET Fund from its inception, August 17, 1987 through its liquidation on
November 30, 1992. It should be noted that the stock market fell sharply on
October 19, 1987. Series A was invested in money market securities at that time
and was not affected by the fall. This explains the large divergence between the
performance of Series A noted above and performance of the S&P 500 index during
the first months of Series A operations. The above information takes into
account the advisory fee payable under Series A of .50%. The advisory fee for
Series C of the Aetna GET Fund offered by this prospectus is .60%. Neither the
Series A administrative services charge, nor the separate account insurance
charges are reflected in the graph above. If this performance information
included the effect of such charges, the performance numbers shown would be
lower. Please refer to your Contract prospectus for Contract charges. The
percentage mix of fixed income and equity securities in Series C is expected to
be different than that of Series A, since it is based on the economic factors at
the beginning of the Guaranteed Period of the Series.
GET Series "B" Performance
The following shows in tabular form the graph which appears here:
(000s omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GET B S&P 500 Lehman Aggregate
Jun - 94 10.00 10.00 10.00
Sep - 94 10.23 10.50 10.06
Dec - 94 10.19 10.49 10.10
Mar - 95 10.75 11.51 10.61
Jun - 95 11.66 12.60 11.26
Sep - 95 12.50 13.61 11.48
Dec - 95 13.07 14.42 11.97
Mar - 96 13.86 15.20 11.75
Jun - 96
</TABLE>
The above graph reflects the results of a $10,000 investment in Series B of the
Aetna GET Fund from its inception, July 1, 1994 through June 30, 1996. The
maturity date of Series B is June 30, 1999. The above information takes into
account the advisory fee payable under Series B of .75%, which is .15% higher
than the advisory fee to be paid with respect to Series C. Neither the
Series B administrative services charge, nor the separate account insurance
charges are reflected in the graph above. If this performance information
included the effect of such charges, the performance numbers shown would be
lower. Please refer to your Contract prospectus for Contract charges. The
percentage mix of fixed income and equity securities in Series C is expected
to be different than that of Series B, since it is based on the economic
factors at the beginning of the Guaranteed Period of the Series.
Expenses and Trust Administration
Under an Administrative Services Agreement with the Trust, ALIAC provides all
administrative services necessary for Series C's operations and is responsible
for the supervision of Series C's other service providers. ALIAC also assumes
all ordinary recurring direct costs of Series C, such as custodian fees,
trustees' fees, transfer agency costs and accounting expenses. For the services
provided under the Administrative Services Agreement, ALIAC receives an annual
fee, payable monthly, at a rate of 0.15% of the average daily net assets of
Series C.
GENERAL INFORMATION
Declaration of Trust
The Trust is a diversified, open-end management investment company organized as
a "series-type" business trust under Massachusetts law on March 9, 1987. The
Declaration of Trust ("Declaration") provides for the issuance of multiple
series of shares, each representing a portfolio of investments with different
investment objectives, policies and restrictions.
The Declaration contains an express disclaimer for shareholder liability for
acts or obligations of the Trust under Massachusetts law, and requires that
notification of such be given in each agreement, obligation or instrument
entered into by the Trust or the Trustees.
Capital Stock
The Declaration permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest in each series of the Trust. All shares
are nonassessable, transferable and redeemable. There are no preemptive rights.
Shareholder Meetings
The Trust is not required to hold annual shareholder meetings. The Declaration
provides for meetings of shareholders to elect Trustees at such times as may be
determined by the Trustees or as required by the Investment Company Act of 1940.
If requested by the holders of at least 10% of a series' outstanding shares, the
series will hold a shareholder meeting for the purpose of voting on the removal
of one or more Trustees and will assist with communication concerning that
shareholder meeting.
Voting Rights
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held on matters submitted to the shareholders of a
series. Voting rights are not cumulative. ALIAC's separate accounts are the
shareholders of Series C under a variable annuity contract, not the contract
holder. ALIAC does, however, provide variable annuity contract holders the right
to direct the voting of shares at shareholder meetings to the extent required by
law.
DISTRIBUTIONS AND TAX STATUS
Dividends and distributions made by Series C to ALIAC are taxable, if at all, to
ALIAC; they are not taxable to variable annuity contract holders. Series C
intends to make such distributions, which will be automatically reinvested in
additional Series C shares at the net asset value thereof.
Series C intends to qualify as a "regulated investment company" (RIC) under the
Internal Revenue Code of 1986, as amended (Code). As a RIC, Series C will not be
liable for federal income taxes on that part of its net investment income and
net capital gains, if any, distributed to shareholders. Series C intends to
maintain diversification of investments as required by the Code in order to
qualify as a RIC.
Series C also intends to comply with the diversification requirements of Section
817(h) of the Code for variable annuity contracts so that the Contract owners
should not be subject to federal tax on distributions of dividends and income
from Series C to the insurance company separate accounts. Contract owners should
review the Contract prospectus for information regarding the tax consequences to
them of purchasing a Contract.
SALE AND REDEMPTION OF SHARES
Shares are sold and redeemed at their net asset value next determined after
receipt of a purchase or redemption order in acceptable form. No sales charge or
redemption charge is made.
During the Offering Period, Assets of Series C will be invested entirely in
money market instruments.
NET ASSET VALUE
The net asset value per share (NAV) of Series C is determined as of 4:15 p.m.
Eastern time on each day that the New York Stock Exchange is open for trading.
The NAV is computed by dividing the total value of Series C's securities, plus
any cash or other assets (including dividends and interest accrued but not
collected) and subtracting all liabilities (including accrued expenses), and
dividing the total by the number of shares outstanding. Portfolio securities are
valued primarily by independent pricing services, based on market quotations.
Short-term debt instruments maturing in less than 60 days are valued at
amortized cost. Securities for which market quotations are not readily
available, are valued at their fair value in such manner as may be determined
under the authority of the Trustees.
PART B
AETNA GET FUND
SERIES C
151 Farmington Avenue
Hartford, Connecticut 06156-8962
STATEMENT OF ADDITIONAL INFORMATION dated:
________________, 1996
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Aetna GET Fund, Series C Shares,
dated _____________, 1996.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-8962
Telephone: 1-800-525-4225
READ THE PROSPECTUS BEFORE YOU INVEST.
TABLE OF CONTENTS
Page
GENERAL INFORMATION AND HISTORY
INVESTMENT OBJECTIVE AND RESTRICTIONS
DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES
THE ASSET ALLOCATION PROCESS
TRUSTEES AND OFFICERS OF THE TRUST
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
THE INVESTMENT ADVISORY AGREEMENT
THE SUB-ADVISORY AGREEMENT
THE ADMINISTRATIVE SERVICES AGREEMENT
CUSTODIAN
INDEPENDENT AUDITORS
PRINCIPAL UNDERWRITER
BROKERAGE ALLOCATION AND TRADING POLICIES
DESCRIPTION OF SHARES
SALE AND REDEMPTION OF SHARES
NET ASSET VALUE
TAX STATUS
VOTING RIGHTS
FINANCIAL STATEMENTS
GENERAL INFORMATION AND HISTORY
Aetna GET Fund (Fund or Trust) is an open-end, diversified management investment
company which sells its shares of beneficial interest to Aetna Life Insurance
and Annuity Company (ALIAC or Investment Adviser) for allocation to certain of
its separate accounts established to fund variable annuity contracts issued by
ALIAC. The Board of Trustees of the Trust (Trustees) may authorize the division
of shares of the Trust into two or more series, each series relating to a
separate portfolio of investments, with different rights as determined by the
Trustees. "Series C" as used herein shall refer to the third series offered by
the Trust.
INVESTMENT OBJECTIVE AND RESTRICTIONS
The investment objective for Series C is to achieve maximum total return by
participating in favorable equity market performance without compromising a
minimum targeted rate of return during a specified five year period, the
"Guaranteed Period," from December 16, 1996 through December 15, 2001, the
maturity date. The Series C investment objective and policies are described in
detail in the prospectus under the caption "Description of Series C." In seeking
to achieve this investment objective, Series C has adopted the following
restrictions which are matters of fundamental policy and cannot be changed
without approval by the holders of the lesser of: (i) 67% of the shares of
Series C present or represented at a shareholders' meeting at which the holders
of more than 50% of such shares are present or represented; or (ii) more than
50% of the outstanding shares of Series C.
As a matter of fundamental policy, Series C will not:
(1)Issue any senior security as defined in the Investment Company Act of
1940, as amended (the Act), except that (a) the Series may enter into
commitments to purchase securities in accordance with the Series' investment
program, including reverse repurchase agreements, delayed delivery and when-
issued securities, which may be considered the issuance of senior securities;
(b) the Series may engage in transactions that may result in the issuance of a
senior security to the extent permitted under applicable regulations,
interpretations of the Act or an exemptive order; (c) the Series may engage in
short sales of securities to the extent permitted in its investment program and
other restrictions; (d) the purchase or sale of futures contracts and related
options shall not be considered to involve the issuance of senior securities;
and (e) subject to the restrictions set forth below, the Series may borrow money
as authorized by the Act.
(2) Borrow money, except that (a) the Series may enter into certain futures
contracts and options related thereto; (b) the Series may enter into commitments
to purchase securities in accordance with the Series' investment program,
including delayed delivery and when-issued securities and reverse repurchase
agreements; (c) the Series may borrow money for temporary or emergency purposes
in amounts not exceeding 15% of the value of its total assets at the time when
the loan is made; and (d) for purposes of leveraging the Series may borrow money
from banks (including its custodian bank), only if, immediately after such
borrowing, the value of the Series' assets, including the amount borrowed, less
its liabilities, is equal to at least 300% of the amount borrowed, plus all
outstanding borrowings. If at any time the value of the Series' assets fails to
meet the 300% coverage requirement relative only to leveraging, the Series
shall, within three days (not including Sundays and holidays), reduce its
borrowings to the extent necessary to meet the 300% test.
(3) Invest more than 15% of the total assets in illiquid securities.
Illiquid securities are securities that are not readily marketable or cannot be
disposed of promptly within seven days and in the usual course of business
without taking a materially reduced price. Such securities include, but are not
limited to, time deposits and repurchase agreements with maturities in excess of
seven days. Securities that may be resold under Rule 144A under the Securities
Act of 1933, as amended (the 1933 Act) or securities offered pursuant to Section
4(2) of the 1933 Act shall not be deemed illiquid solely by reason of being
unregistered. The Investment Adviser shall determine whether a particular
security is deemed to be illiquid based on the trading markets for the specific
security and other factors.
(4) Act as an underwriter of securities except to the extent that, in
connection with the disposition of securities by Series C for its portfolio,
Series C or the Trust may be deemed to be an underwriter under the provisions of
the 1933 Act.
(5) Purchase real estate, interests in real estate or real estate limited
partnership interests except that, to the extent appropriate under its
investment program, Series C may invest in securities secured by real estate or
interests therein or issued by companies, including real estate investment
trusts, which deal in real estate or interests therein;
(6) Make loans, except that, to the extent appropriate under its investment
program, Series C may (a) purchase bonds, debentures or other debt securities,
including short-term obligations; (b) enter into repurchase transactions and (c)
lend portfolio securities provided that the value of such loaned securities does
not exceed one-third of the Series' total assets.
(7)Invest in commodity contracts, except that the Series may, to the extent
appropriate under its investment program, purchase securities of companies
engaged in such activities; may enter into futures contracts and related
options, may engage in transactions on a when-issued or forward commitment
basis, and may enter into forward currency contracts in accordance with its
overall investment program.
Provided, however, that whenever any of the foregoing provisions states a
maximum percentage of the assets of Series C which may be invested in any
securities or other property, any excess of the actual percentage limitation
shall be considered a violation of such restriction only if such excess exists
immediately after the acquisition of such security or property and resulted in
whole or in part from such acquisition.
Series C also has adopted certain other investment policies and restrictions
reflecting the current investment practices of Series C, which may be changed by
the Trustees and without shareholder vote. Under such policies and restrictions,
Series C will not:
(1)Invest more than 5% of its total assets in the securities of an issuer
excluding securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, or purchase more than 10% of the outstanding voting
securities of any issuer.
(2) Invest more than 25% of its total assets in securities or obligations
of foreign issuers, including marketable securities of, or guaranteed by,
foreign governments (or any instrumentality or subdivision thereof). Series C
will invest in securities or obligations of foreign banks only if such banks
have a minimum of $5 billion in assets and a primary capital ratio of at least
4.25%.
(3) Mortgage, pledge or hypothecate its assets except in connection with
loans of securities permitted by Fundamental Restriction 6, borrowings permitted
under Fundamental Restriction 2, and permitted transactions involving options,
futures contracts and options on such contracts.
(4)Invest in companies for the purpose of exercising control or
management.
(5) Purchase the securities of any other investment company, except as
permitted under the Act.
(6) Purchase interests in oil, gas or other mineral exploration programs;
however, this limitation will not prohibit the acquisition of securities of
companies engaged in the production or transmission of oil, gas, or other
minerals.
(7) Incur aggregate borrowings which exceed 15% of the market value of
Series C's assets (including such borrowings) less liabilities (excluding such
borrowings). There will be no new purchases if borrowing exceeds 5% of Series
C's total assets.
(8) Make short sales of securities, other than short sales "against the
box," or purchase securities on margin except for short-term credits necessary
for clearance of portfolio transactions, provided that this restriction will not
be applied to limit the use of options, futures contracts and related options in
the manner otherwise permitted by the investment restrictions, policies and
investment programs of the Series.
(9) Concentrate its investments in any one industry except Series C may
invest up to 25% of its total assets in securities issued by companies
principally engaged in any one industry. For purposes of this restriction,
finance companies will be classified as separate industries according to the end
users of their services, such as automobile finance, computer finance and
consumer finance. This limitation will not apply to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES
Options, Futures and Other Derivative Instruments
Series C may use derivative instruments as described in the prospectus under
"Investment Techniques." The following provides additional information about
these instruments.
Futures Contracts - Series C may enter into futures contracts as described in
the prospectus. Series C may enter into futures contracts which are traded on
national futures exchanges and are standardized as to maturity date and
underlying financial instrument. The futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (the "CFTC").
A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument(s) or a
specific stock market index for a specified price at a designated date and
time. Brokerage fees are incurred when a futures contract is bought or sold and
at expiration, and margin deposits must be maintained.
Although interest rate futures contracts typically require actual future
delivery of and payment for the underlying instruments, those contracts are
usually closed out before the delivery date. Stock index futures contracts do
not contemplate actual future delivery and will be settled in cash at expiration
or closed out prior to expiration. Closing out an open futures contract sale or
purchase is effected by entering into an offsetting futures contract purchase or
sale, respectively, for the same aggregate amount of the identical type of
underlying instrument and the same delivery date. There can be no assurance,
however, that Series C will be able to enter into an offsetting transaction with
respect to a particular contract at a particular time. If Series C is not able
to enter into an offsetting transaction, it will continue to be required to
maintain the margin deposits on the contract.
The prices of futures contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates and equities prices,
which in turn are affected by fiscal and monetary policies and national and
international political and economic events.
When using futures contracts as a hedging technique, at best, the correlation
between changes in prices of futures contracts and of the securities being
hedged can be only approximate. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
futures and for securities, including technical influences in futures trading,
and differences between the financial instruments being hedged and the
instruments underlying the standard futures contracts available for trading.
Even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or stock market or interest rate trends.
Most United States futures exchanges limit the amount of fluctuation permitted
in interest rates futures contract prices during a single trading day, and
temporary regulations limiting price fluctuations for stock index futures
contracts are also now in effect. The daily limits establishes the maximum
amount that the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not limit potential
losses, because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some persons engaging in futures
transactions to substantial losses.
Sales of futures contracts which are intended to hedge against a change in the
value of securities held by Series C may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
"Margin" is the amount of funds that must be deposited by Series C with a
commodities broker in a custodian account in order to initiate futures trading
and to maintain open positions in Series C's futures contracts. A margin deposit
is intended to assure Series C's performance of the futures contract. The margin
required for a particular futures contract is set by the exchange on which the
contract is traded and may be significantly modified from time to time by the
exchange during the term of the contract.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
promptly pay the excess to Series C. These daily payments to and from Series C
are called variation margin. At times of extreme price volatility such as
occurred during the week of October 19, 1987, intra-day variation margin
payments may be required. In computing daily net asset values, Series C will
mark to market the current value of its open futures contracts. Series C expects
to earn interest income on its initial margin deposits. Furthermore, in the case
of a futures contract purchase, Series C has deposited in a segregated account
money market instruments sufficient to meet all futures contract initial margin
requirements.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, small price movements in futures
contracts may result in immediate and potentially unlimited loss or gain to
Series C relative to the size of the margin commitment. For example, if at the
time of purchase 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit before any deduction for the
transaction costs, if the contract were then closed out. A 15% decrease in the
value of the futures contract would result in a loss equal to 150% of the
original margin deposit, if the contract were closed out. Thus, a purchase or
sale of a futures contract may result in losses in excess of the amount
initially invested in the futures contract. However, Series C would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Series C can enter into options on futures contacts. See "Covered Call and Put
Options" below. The risk involved in writing options on futures contracts or
market indices is that there could be an increase in the market value of such
contracts or indices. If that occurred, the option would be exercised and Series
C would not benefit from any increase in value above the exercise price.
Usually, this risk can be eliminated by entering into an offsetting transaction.
However, the cost to do an offsetting transaction and terminate the Series C's
obligation might be more or less than the premium received when it originally
wrote the option. Further, Series C might occasionally not be able to close the
option because of insufficient activity in the options market.
Covered Call and Put Options -Series C may write (sell) covered call options and
purchase put options and may purchase call and sell put options including
options on securities, indices and futures as discussed in the prospectus and in
this Section. A call option gives the holder (buyer) the right to buy and
obligates the writer (seller) to sell a security or financial instrument at a
stated price (strike price) at any time until a designated future date when the
option expires (expiration date). A put option gives the holder (buyer) the
right to sell and obligates the writer (seller) to purchase a security or
financial instrument at a stated price at any time until the expiration date.
Series C may write or purchase put or call options listed on national securities
exchanges in standard contracts or may write or purchase put or call options
with or directly from investment dealers meeting the creditworthiness criteria
of the Investment Adviser.
So long as the obligation of the writer of a call option continues, the writer
may be assigned an exercise notice by the broker-dealer through which such
option was settled, requiring the writer to deliver the underlying security
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, by the exercise of the call option, or by
entering into an offsetting transaction. To secure the writer's obligation to
deliver the underlying security, a writer of a call option is required to
deposit in escrow the underlying security or other assets in accordance with the
rules of the clearing corporations and of the exchanges. Series C will only
write a call option on a security which it already owns and will not write call
options on when-issued securities.
When writing a call option, in return for the premium, the writer gives up the
opportunity to profit from the price increase in the underlying security above
the exercise price, but conversely retains the risk of loss should the price of
the security decline. If a call option expires unexercised, the writer will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security during the option
period. If the call option is exercised, the writer would realize a gain or loss
from the transaction depending on what it received from the call and what it
paid for the underlying security.
Series C may purchase and write call options on stock indices, including the S&P
500, as well as on any individual stock, as described below. Series C will use
these techniques primarily as a temporary substitute for taking positions in
certain securities or in the securities that comprise the index, particularly if
the Investment Adviser considers these instruments to be undervalued relative to
the prices of particular securities or of the securities that comprise the
index.
An option on an index (or a particular security) is a contract that gives the
purchaser of the option, in return for the premium paid, the right to receive
from the writer of the option cash equal to the difference between the closing
price of the index (or security) and the exercise price of the option, expressed
in dollars, times a specified multiple (the "multiplier"). Series C may, in
particular, purchase call options on an index (or a particular security) to
protect against increases in the price of securities underlying that index (or
individual securities) that Series C intends to purchase pending its ability to
invest in such securities in an orderly manner.
In the case of a put option, as long as the obligation of the put writer
continues, it may be assigned an exercise notice by the broker-dealer through
which such option was sold, requiring the writer to take delivery of the
underlying security against payment of the exercise price. A writer has no
control over when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the expiration date.
This obligation terminates earlier if the writer effects a closing purchase
transaction by purchasing a put of the same series as that previously sold.
To secure its obligation to pay for the underlying security, the writer of a put
generally must deposit in escrow liquid assets with a value equal to or greater
than the exercise price of the put option. The writer therefore foregoes the
opportunity of investing the segregated assets or writing calls against those
assets. Series C may write put options on debt securities or futures, only if
such puts are covered by segregated liquid assets.
In writing puts, there is the risk that a writer may be required to buy the
underlying security at a disadvantageous price. Writing a put covered by
segregated liquid assets equal to the exercise of the put has the same economic
effect as writing a covered call option. The premium the writer receives from
writing a put option represents a profit, as long as the price of the underlying
instrument remains above the exercise price; however, if the put is exercised,
the writer is obligated during the option period to buy the underlying
instrument from the buyer of the put at the exercise price, even though the
value of the investment may have fallen below the exercise price. If the put
lapses unexercised, the writer realizes a gain in the amount of the premium. If
the put is exercised, the writer may incur a loss, equal to the difference
between the exercise price and the current market value of the underlying
instrument.
Series C may purchase put options when the Investment Adviser believes that a
temporary defensive position is desirable in light of market conditions, but
does not desire to sell a portfolio security. The purchase of put options for
these purposes may be used to protect Series C's holdings in an underlying
security against a substantial decline in market value. Such protection is, of
course, only provided during the life of the put option when Series C, as the
holder of the put option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying security's market
price. By using put options in this manner, the Series will reduce any profit it
might otherwise have realized in its underlying security by the premium paid for
the put option and by transaction costs. The security covering the call or put
option will be segregated at Series C's custodian.
The premium received from writing a call or put option, or paid for purchasing a
call or put option will reflect, among other things, the current market price of
the underlying security, the relationship of the exercise price to such market
price, the historical price volatility of the underlying security, the length of
the option period, and the general interest rate environment. The premium
received by Series C for writing call options will be recorded as a liability in
the statement of assets and liabilities of Series C. This liability will be
adjusted daily to the option's current market value. The liability will be
extinguished upon expiration of the option, by the exercise of the option, or by
entering into an offsetting transaction. Similarly, the premium paid by Series C
when purchasing a put option will be recorded as an asset in the statement of
assets and liabilities of Series C. This asset will be adjusted daily to the
option's current market value. The asset will be extinguished upon expiration of
the option, by selling an identical option in a closing transaction, or by
exercising the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call or put option, to prevent an underlying security from being
called or put, or to permit the exchange or tender of the underlying security.
Furthermore, effecting a closing transaction will permit Series C to write
another call option, or purchase another put option, on the underlying security
with either a different exercise price or expiration date or both. If Series C
desires to sell a particular security from its portfolio on which it has written
a call option, or purchased a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security. There is,
of course, no assurance that Series C will be able to effect a closing
transaction at a favorable price. If Series C cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security.
Series C will pay brokerage commissions in connection with the sale or purchase
of options to close out previously established option positions. Such brokerage
commissions are normally higher as a percentage of underlying asset values
than those applicable to purchases and sales of portfolio securities.
The exercise price of an option may be below, equal to, or above the current
market value of the underlying security at the time the option is written. From
time to time, Series C may purchase an underlying security for delivery in
accordance with an exercise notice of a call option assignment, rather than
delivering such security from its portfolio. In such cases additional brokerage
commissions will be incurred.
Series C will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option; however, any loss so incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a
simultaneous or subsequent sale of a different option. Also, because increases
in the market price of a call option will generally reflect increases in the
market price of the underlying security, any loss resulting from the repurchase
of a call option is likely to be offset in whole or in part by appreciation of
the underlying security owned by Series C. Any profits from writing covered call
options are considered short-term gain for federal income tax purposes and, when
distributed by Series C, are taxable as ordinary income.
Foreign Futures Contracts and Foreign Options - Series C may engage in
transactions in foreign futures contracts and foreign options. Participation in
foreign futures contracts and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade. Neither the CFTC, the National Futures Association ("NFA") nor any
domestic exchange regulates activities of any foreign boards of trade including
the execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable foreign
laws. Generally, the foreign transaction will be governed by applicable foreign
law. This is true even if the exchange is formally linked to a domestic market
so that a position taken on the market may be liquidated by a transaction on
another market. Moreover, such laws or regulations will vary depending on the
foreign country in which the foreign futures contract or foreign options
transaction occurs. Investors which trade foreign futures contracts or foreign
options contracts may not be afforded certain of the protective measures
provided by domestic exchanges, including the right to use reparations
proceedings before the CFTC and arbitration proceedings provided by the NFA. In
particular, funds received from customers for foreign futures contracts or
foreign options transactions may not be provided the same protections as funds
received for transactions on United States futures exchanges. The price of any
foreign futures contracts or foreign options contract and, therefore, the
potential profit and loss thereon, may be affected by any variance in the
foreign exchange rate between the time an order is placed and the time it is
liquidated, offset or exercised.
Options on Foreign Currencies - Series C may write and purchase calls on foreign
currencies. Series C may purchase and write puts and calls on foreign currencies
that are traded on a securities or commodities exchange or quoted by major
recognized dealers in such options for the purposes of protecting against
declines in the dollar value of foreign securities and against increases in the
dollar cost of foreign securities to be acquired. If a rise is anticipated in
the dollar value of a foreign currency in which securities to be required are
denominated, the increased cost of such securities may be partially offset by
purchasing calls or writing puts on that foreign currency. If a decline in the
dollar value of a foreign currency is anticipated, the decline in value of
portfolio securities denominated in that currency may be partially offset
by writing calls or purchasing puts on that foreign currency. In the event of
rate fluctuations adverse to Series C's position, it would lose the premium it
paid and transaction costs. A call written on a foreign currency by Series C is
covered if Series C owns the underlying foreign currency covered by the call or
has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other foreign currency held in its portfolio. A call may be written
by Series C on a foreign currency to provide a hedge against a decline due to an
expected adverse change in the exchange rate in the U.S. dollar value of a
security which Series C owns or has the right to acquire and which is
denominated in the currency underlying the option. This is a "cross-hedging"
strategy. In such circumstances, Series C collateralizes the position by
maintaining in a segregated account with Series C's custodian cash or U.S.
Government securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
Forward Exchange Contracts -Series C may enter into forward contracts for
foreign currency ("forward exchange contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of a specified foreign
currency at a future date at a price set at the time of the contract. These
contracts are generally traded in the interbank market conducted directly
between currency traders and their customers. Series C may enter into a forward
exchange contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which has
not yet settled (a "transaction hedge"); or to lock in the value of an existing
portfolio security (a "position hedge"); or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
a foreign currency. There is a risk that use of forward exchange contracts may
reduce the gain that would otherwise result from a change in the relationship
between the U.S. dollar and a foreign currency. Forward exchange contracts
include standardized foreign currency futures contracts which are traded on
exchanges and are subject to procedures and regulations applicable to futures.
Series C may also enter into a forward exchange contract to sell a foreign
currency which differs from the currency in which the underlying security is
denominated. This is done in the expectation that there is a greater correlation
between the foreign currency of the forward exchange contract and the foreign
currency of the underlying investment than between the U.S. dollar and the
foreign currency of the underlying investment. This technique is referred to as
"cross-hedging." The success of cross-hedging is dependent on many factors,
including the ability of the Investment Adviser to correctly identify and
monitor the correlation between foreign currencies and the U.S. dollar. To the
extent that the correlation is not identical, Series C may experience losses or
gains on both the underlying security and the cross currency hedge.
Series C may use forward exchange contracts to protect against uncertainty in
the level of future exchange rates. The use of forward exchange contracts does
not eliminate fluctuations in the prices of the underlying securities Series C
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although forward exchange contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies increase.
There is no limitation as to the percentage of Series C's assets that may be
committed to forward exchange contracts. Series C will not enter into a
"cross-hedge," unless it is denominated in a currency or currencies that the
Investment Adviser believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is denominated.
Series C's custodian will place cash or U.S. Government securities or other
liquid high-quality debt securities in a separate account of Series C having a
value equal to the aggregate amount of Series C's commitments under forward
contracts entered into with respect to position hedges and cross-hedges. If the
value of the securities placed in the separate account declines, additional cash
or securities will be placed in the account on a daily basis so that the value
of the account will equal the amount of Series C's commitments with respect to
such contracts. As an alternative to maintaining all or part of the separate
account, Series C may purchase a call option permitting Series C to purchase the
amount of foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price, or Series C may purchase a put option
permitting Series C to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the forward contract price.
Unanticipated changes in currency prices may result in poorer overall
performance for Series C than if it had not entered into such contracts.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the forward contract
is entered into and the date it is sold. Accordingly, it may be necessary for
Series C to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency Series C is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency Series C is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing Series C to sustain losses
on these contracts and transactions costs.
At or before the maturity of a forward exchange contract requiring Series C to
sell a currency, Series C may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which Series C will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, Series C may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. Series C would realize a
gain or loss as a result of entering into such an offsetting forward contract
under either circumstance to the extent the exchange rate(s) between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to Series C of engaging in forward exchange contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, Series C must evaluate the credit
and performance risk of each particular counterparty under a forward contract.
Although Series C values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. Series C may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to Series C at
one rate, while offering a lesser rate of exchange should Series C desire to
resell that currency to the dealer.
Restrictions on the Use of Futures and Option Contracts - CFTC regulations
require that all short futures positions be entered into for the purpose of
hedging the value of securities held, and that all long futures positions either
constitute bona fide hedging transactions, as defined in such regulations, or
have a total value not in excess of an amount determined by reference to certain
cash and securities positions maintained, and accrued profits on such positions.
With respect to futures contracts or related options that are entered into for
purposes that may be considered speculative, the aggregate initial margin for
future contracts and premiums for options will not exceed 5% of Series C's net
assets, after taking into account realized profits and unrealized losses on such
futures contracts.
Series C's ability to engage in the hedging transactions described herein may be
limited by the current federal income tax requirement that Series C derive less
than 30% of its gross income from the sale or other disposition of stock or
securities held for less than three months.
Interest Rate Swap Transactions - Swap agreements entail both interest rate risk
and credit risk. There is a risk that, based on movements of interest rates in
the future, the payments made by Series C under a swap agreement will have been
greater than those received by it. Credit risk arises from the possibility that
the counterparty will default. If the counterparty to an interest rate swap
defaults, Series C's loss will consist of the net amount of contractual interest
payments that Series C has not yet received. The Investment Adviser will monitor
the creditworthiness of counterparties to Series C's interest rate swap
transactions on an ongoing basis. Series C will enter into swap transactions
with appropriate counterparties pursuant to master netting agreements. A master
netting agreement provides that all swaps done between Series C and that
counterparty under that master agreement shall be regarded as parts of an
integral agreement. If on any date amounts are payable in the same currency in
respect of one or more swap transactions, the net amount payable on that date in
that currency shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the counterparty
may terminate the swaps with that party. Under such agreements, if there is a
default resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with respect
to each swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the result is
the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as
"aggregation."
Additional Risk Factors in Using Derivatives - In addition to any risk factors
which may be described elsewhere in this section, or in the prospectus under
"Investment Techniques" and "Risk Factors and Other Considerations," the
following sets forth certain information regarding the potential risks
associated with Series C's transactions in derivatives.
Risk of Imperfect Correlation - Series C's ability to hedge effectively all
or a portion of its portfolio through transactions in futures, options on
futures or options on securities and indexes depends on the degree to which
movements in the value of the securities or index underlying such hedging
instrument correlate with movements in the value of the assets being hedged. If
the values of the assets being hedged do not move in the same amount or
direction as the underlying security or index, the hedging strategy for Series C
might not be successful and Series C could sustain losses on its hedging
transactions which would not be offset by gains on its portfolio. It is also
possible that there may be a negative correlation between the security or index
underlying a futures or option contract and the portfolio securities being
hedged, which could result in losses both on the hedging transaction and the
portfolio securities. In such instances, Series C's overall return could be less
than if the hedging transactions had not been undertaken. Stock index futures or
options based on a narrower index of securities may present greater risk than
options or futures based on a broad market index, as a narrower index is more
susceptible to rapid and extreme fluctuations resulting from changes in the
value of a small number of securities. Series C would, however, effect
transactions in such futures or options only for hedging purposes (or to close
out open positions).
The trading of futures and options on indices involves the additional risk of
imperfect correlation between movements in the futures or option price and the
value of the underlying index. The anticipated spread between the prices may be
distorted due to differences in the nature of the markets, such as differences
in margin requirements, the liquidity of such markets and the participation of
speculators in the futures and options market. The purchase of an option on a
futures contract also involves the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the futures contract or termination date of the
option approaches. The risk incurred in purchasing an option on a futures
contract is limited to the amount of the premium plus related transaction costs,
although it may be necessary under certain circumstances to exercise the option
and enter into the underlying futures contract in order to realize a profit.
Under certain extreme market conditions, it is possible that Series C will not
be able to establish hedging positions, or that any hedging strategy adopted
will be insufficient to completely protect Series C.
Series C will purchase or sell futures contracts or options for hedging
purposes, only if, in the Investment Adviser's judgment, there is expected to be
a sufficient degree of correlation between movements in the value of such
instruments and changes in the value of the assets being hedged for the hedge to
be effective. There can be no assurance that the Investment Adviser's judgment
will be accurate.
Potential Lack of a Liquid Secondary Market - The ordinary spreads between
prices in the cash and futures markets, due to differences in the natures of
those markets, are subject to distortions. First, all participants in the
futures markets are subject to initial deposit and variation margin
requirements. This could require Series C to post additional cash or cash
equivalents as the value of the position fluctuates. Rather than meeting
additional variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures or
options market may be lacking. Prior to exercise or expiration, a futures or
option position may be terminated only by entering into a closing purchase or
sale transaction, which requires a secondary market on the exchange on which the
position was originally established. While Series C will establish a futures or
option position only if there appears to be a liquid secondary market therefor,
there can be no assurance that such a market will exist for any particular
futures or option contract at any specific time. In such event, it may not be
possible to close out a position held by Series C, which could require Series C
to purchase or sell the instrument underlying the position, make or receive a
cash settlement, or meet ongoing variation margin requirements. The inability to
close out futures or option positions also could have an adverse impact on
Series C's ability effectively to hedge its portfolio, or the relevant portion
thereof.
The liquidity of a secondary market in a futures contract or an option on a
futures contract may be adversely affected by "daily price fluctuation limits"
established by the exchanges, which limit the amount of fluctuation in the price
of a contract during a single trading day and prohibit trading beyond such
limits once they have been reached. The trading of futures and options contracts
also is subject to the risk of trading halts, suspensions, exchange or clearing
house equipment failures, government intervention, insolvency of the brokerage
firm or clearing house or other disruptions of normal trading activity, which
could at times make it difficult or impossible to liquidate existing positions
or to recover excess variation margin payments.
Risk of Predicting Interest Rate Movements - Investments in futures
contracts on fixed income securities and related indices involve the risk that
if the Investment Adviser's judgment concerning the general direction of
interest rates is incorrect, Series C's overall performance may be poorer than
if it had not entered into any such contract. For example, if Series C has been
hedged against the possibility of an increase in interest rates which would
adversely affect the price of bonds held in its portfolio and interest rates
decrease instead, Series C will lose part or all of the benefit of the increased
value of its bonds which ave been hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if Series C has
insufficient cash, it may have to sell bonds from its portfolio to meet daily
variation margin requirements, possibly at a time when it may be disadvantageous
to do so. Such sale of bonds may be, but will not necessarily be, at increased
prices which reflect the rising market.
Trading and Position Limits - Each contract market on which futures and
option contracts are traded has established a number of limitations governing
the maximum number of positions which may be held by a trader, whether acting
alone or in concert with others. The Company does not believe that these trading
and position limits will have an adverse impact on the hedging strategies
regarding Series C.
Repurchase Agreements
Series C may enter into repurchase agreements with domestic banks and
broker-dealers meeting certain size and creditworthiness standards established
by the Company's Board of Directors. A repurchase agreement allows Series C to
determine the yield during Series C's holding period. This results in a fixed
rate of return insulated from market fluctuations during such period. Such
underlying debt instruments serving as collateral will meet the quality
standards of Series C. The market value of the underlying debt instruments will,
at all times, be equal to the dollar amount invested. Repurchase Agreements,
although fully collateralized, involve the risk that the seller of the
securities may fail to repurchase them from Series C. In that event, Series C
may incur (a) disposition costs in connection with liquidating the collateral,
or (b) a loss if the collateral declines in value. Also, if the default on the
part of the seller is due to insolvency and the seller initiates bankruptcy
proceedings, Series C's ability to liquidate the collateral may be delayed or
limited. Under the 1940 Act, repurchase agreements are considered loans by
Series C. Repurchase agreements maturing in more than seven days will not exceed
15 percent of the total assets of Series C.
Variable Rate Demand Instruments
Variable rate demand instruments (including floating rate instruments) held by
Series C may have maturities of more than one year, provided: (i) Series C is
entitled to the payment of principal at any time, or during specified intervals
not exceeding one year, upon giving the prescribed notice (which may not exceed
30 days), and (ii) the rate of interest on such instruments is adjusted at
periodic intervals not to exceed one year. In determining whether a variable
rate demand instrument has a remaining maturity of one year or less, each
instrument will be deemed to have a maturity equal to the longer of the period
remaining until its next interest rate adjustment or the period remaining until
the principal amount can be recovered through demand. Series C will be able (at
any time or during specified periods not exceeding one year, depending upon the
note involved) to demand payment of the principal of a note. If an issuer of a
variable rate demand note defaulted on its payment obligation, Series C might be
unable to dispose of the note and a loss would be incurred to the extent of the
default. Series C may invest in variable rate demand notes only when the
investment is deemed to involve minimal credit risk. The continuing
creditworthiness of issuers of variable rate demand notes held by Series C will
also be monitored to determine whether such notes should continue to be held.
Variable and floating rate instruments with demand periods in excess of seven
days and which cannot be disposed of promptly within seven business days and in
the usual course of business without taking a reduced price will be treated as
illiquid securities that are subject to the Portfolio's policies and
restrictions on illiquid securities.
Securities Lending
Series C can lend securities in its portfolio subject to the following
conditions: (a) the borrower will provide collateral equal to an amount of at
least 100% of the then current market value of the loaned securities throughout
the life of the loan; (b) loans will be made subject to the rules of the New
York Stock Exchange; (c) the loan collateral will be either cash, direct
obligations of the U.S. government or agencies thereof or irrevocable letters of
credit; (d) cash collateral will be invested only in highly liquid short-term
investments; (e) during the existence of a loan, Series C will continue to
receive any distributions paid on the borrowed securities or amounts equivalent
thereto; and (f) no more than one-third of the net assets of Series C will be on
loan at any one time. A loan may be terminated at any time by the borrower or
lender upon proper notice.
In the Investment Adviser's opinion, lending portfolio securities to qualified
broker-dealers affords Series C a means of increasing the yield on its
portfolio. Series C will be entitled either to receive a fee from the borrower
or to retain some or all of the income derived from its investment of cash
collateral. Series C will continue to receive the interest or dividends paid on
any securities loaned, or amounts equivalent thereto. Although voting rights
will pass to the borrower of the securities, whenever a material event affecting
the borrowed securities is to be voted on, the Investment Adviser will regain or
direct the vote with respect to loaned securities.
The primary risk Series C assumes in loaning securities is that the borrower may
become insolvent on a day on which the loaned security is rapidly increasing in
price. In such event, if the borrower fails to return the loaned securities, the
existing collateral might be insufficient to purchase back the full amount of
the security loaned, and the borrower would be unable to furnish additional
collateral. The borrower would be liable for any shortage, but Series C would be
an unsecured creditor as to such shortage and might not be able to recover all
or any of it.
Foreign Securities
Investments in foreign securities, including futures and options contracts,
offer potential benefits not available solely through investment in securities
of domestic issuers. Foreign securities offer the opportunity to invest in
foreign issuers that appear to offer growth potential, or in foreign countries
with economic policies or business cycles different from those of the United
States, or to reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that may not move in a manner parallel to U.S. markets.
Investments in securities of foreign issuers involve certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in exchange rates, adverse foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign governmental laws or restrictions. Since Series C may invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
in the portfolio and the unrealized appreciation or depreciation of investments
so far as U.S. investors are concerned. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability, or diplomatic developments that could
adversely affect investments in those countries.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer, and foreign issuers may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to or as
uniform as those of U.S. issuers. Foreign securities markets, while growing in
volume, have, for the most part, substantially less volume than U.S. markets.
Securities of many foreign issuers are less liquid and their prices more
volatile than securities of comparable U.S. issuers. Transactional costs in
non-U.S. securities markets are generally higher than in U.S. securities
markets. There is generally less government supervision and regulation of
exchanges, brokers, and issuers than there is in the U.S. The Trust might have
greater difficulty taking appropriate legal action with respect to foreign
investments in non-U.S. courts than with respect to domestic issuers in U.S.
courts. In addition, transactions in foreign securities may involve greater time
from the trade date until settlement than domestic securities transactions and
involve the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
Currently, direct investment in equity securities in China and Taiwan is
restricted, and investments may be made only through a limited number of
approved vehicles. At present this includes investment in listed and unlisted
investment companies, subject to limitations under the 1940 Act. Investment in
these closed-end funds may involve the payment of additional premiums to acquire
shares in the open-market and the yield of these securities will be reduced by
the operating expenses of such companies. In addition, an investor should
recognize that he or she will bear not only his proportionate share of the
expenses of Series C, but also indirectly bear similar expenses of the
underlying closed-end fund. Also, as a result of Series C's policy of investing
in closed-end mutual funds, investors in the portfolio may receive taxable
capital gains distributions to a greater extent than if he or she had invested
directly in the underlying closed-end fund.
Dividend and interest income from foreign securities may generally be subject to
withholding taxes by the country in which the issuer is located and may not be
recoverable by Series C or its investors.
Depositary receipts are typically dollar denominated, although their market
price is subject to fluctuations of the foreign currency in which the underlying
securities are denominated. Depositary receipts include: (a) American Depositary
Receipts (ADRs), which are typically designed for U.S. investors and held either
in physical form or in book entry form; (b) European Depositary Receipts (EDRs),
which are similar to ADRs but may be listed and traded on a European exchange as
well as in the United States. Typically, these securities are traded on the
Luxembourg exchange in Europe; and (c) Global Depositary Receipts (GDRS), which
are similar to EDRS although they may be held through foreign clearing agents
such as Euroclear and other foreign depositories.
Mortgage-Related Debt Securities
Federal mortgage-related securities include obligations issued or guaranteed by
the Government National Mortgage Association (GNMA), the Federal National
Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation
(FHLMC). GNMA is a wholly owned corporate instrumentality of the United States,
the securities and guarantees of which are backed by the full faith and credit
of the United States. FNMA, a federally chartered and privately owned
corporation, and FHLMC, a federal corporation, are instrumentalities of the
United States with Presidentially-appointed board members. The obligations of
FNMA and FHLMC are not explicitly guaranteed by the full faith and credit of the
federal government.
Pass-through, mortgage-related securities are characterized by monthly payments
to the holder, reflecting the monthly payments made by the borrowers who
received the underlying mortgage loans. The payments to the security holders,
like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are for specified periods of
time, often twenty or thirty years, the borrowers can repay such loans sooner.
Thus, the security holders frequently receive repayments of principal, in
addition to the principal which is part of the regular monthly payment. A
borrower is more likely to repay a mortgage which bears a relatively high rate
of interest. This means that in times of declining interest rates, some higher
yielding securities held by Series C might be converted to cash, and Series C
could be expected to reinvest such cash at the then prevailing lower rates. The
increased likelihood of prepayment when interest rates decline also limits
market price appreciation of mortgage-related securities. If Series C buys
mortgage-related securities at a premium, mortgage foreclosures or mortgage
prepayments may result in losses of up to the amount of the premium paid since
only timely payment of principal and interest is guaranteed.
As noted in the Prospectus, Series C may also invest in collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs). CMOs
and REMICs are securities which are collateralized by mortgage pass-through
securities. Cash flows from underlying mortgages are allocated to various
classes or tranches in a predetermined, specified order. Each sequential tranche
has a "stated maturity" - the latest date by which the tranche can be completely
repaid, assuming no repayments - and has an "average life" - the average time to
receipt of a principal payment weighted by the size of the principal payment.
The average life is typically used as a proxy for maturity because the debt is
amortized, rather than being paid off entirely at maturity, as would be the case
in a straight debt instrument.
CMOs and REMICs are typically structured as "pass-through" securities. In these
arrangements, the underlying mortgages are held by the issuer, which then issues
debt collateralized by the underlying mortgage assets. The security holder thus
owns an obligation of the issuer and payment of interest and principal on such
obligations is made from payments generated by the underlying mortgage assets.
The underlying mortgages may be guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. Government such as GNMA or
otherwise backed by FNMA or FHLMC. Alternatively, such securities may be backed
by mortgage insurance, letters of credit or other credit enhancing features.
Both CMOs and REMICs are issued by private entities. They are not directly
guaranteed by any government agency and are secured by the collateral held by
the issuer.
Asset-Backed Securities
Asset-backed securities are collateralized by short-term loans such as
automobile loans, home equity loans, or credit card receivables. The payments
from the collateral are passed through to the security holder. As noted above
with respect to CMOs and REMICs, the average life for these securities is the
conventional proxy for maturity. Asset-backed securities may pay all interest
and principal to the holder, or they may pay a fixed rate of interest, with any
excess over that required to pay interest going either into a reserve account or
to a subordinate class of securities, which may be retained by the originator.
The originator may guarantee interest and principal payments. These guarantees
often do not extend to the whole amount of principal, but rather to an amount
equal to a multiple of the historical loss experience of similar portfolios.
Two varieties of asset-backed securities are CARs and CARDs. CARs are
securities, representing either ownership interests in fixed pools of automobile
receivables, or debt instruments supported by the cash flows from such a pool.
CARDs are participations in fixed pools of credit accounts. These securities
have varying terms and degrees of liquidity.
Asset-backed securities may be subject to the type of prepayment risk discussed
above due to the possibility that prepayments on the underlying assets will
alter the cash flow. Faster prepayments will shorten the average life and slower
prepayments will lengthen it.
The coupon rate of interest on mortgage-related and asset-backed securities is
lower than the interest rates paid on the mortgages included in the underlying
pool, by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor. Actual yield may vary from the coupon rate, however, if such
securities are purchased at a premium or discount, trade in the secondary market
at a premium or discount, or to the extent that the underlying assets are
prepaid as noted above.
High Risk, High-Yield Securities
Series C may invest in high risk, high-yield securities ("junk bonds"), which
are fixed income securities that offer a current yield above that generally
available on higher quality debt securities. These securities are regarded as
speculative and generally involve more risk of loss of principal and income than
higher-rated securities. Also their yields and market values tend to fluctuate
more. Fluctuations in value do not affect the cash income from the securities
but are reflected in Series C's net asset value. The greater risks and
fluctuations in yield and value occur, in part, because investors generally
perceive issuers of lower-rated and unrated securities to be less creditworthy.
Lower ratings, however, may not necessarily indicate higher risks. In pursuing
Series C's objectives, the Investment Adviser seeks to identify situations in
which the rating agencies have not fully perceived the value of the security or
in which the Investment Adviser believes that future developments will enhance
the creditworthiness and the ratings of the issuer.
The yields earned on high risk, high-yield securities (junk bonds) generally are
higher than those of higher quality securities with the same maturities because
of the additional risks associated with them. These risks include:
(1) Sensitivity to Interest Rate and Economic Changes. High risk,
high-yield securities (junk bonds) are more sensitive to adverse economic
changes or individual corporate developments but less sensitive to interest rate
changes than are investment grade bonds. As a result, when interest rates rise,
causing bond prices to fall, the value of these securities may not fall as much
as investment grade corporate bonds. Conversely, when interest rates fall, these
securities may underperform investment grade corporate bonds because the prices
of high risk, high-yield securities (junk bonds) tend not to rise as much as the
prices of those other bonds.
Also, the financial stress resulting from an economic downturn or adverse
corporate developments could have a greater negative effect on the ability of
issuers of these securities to service their principal and interest payments, to
meet projected business goals and to obtain additional financing, than on more
creditworthy issuers. Holders of these securities could also be at greater risk
because these securities are generally unsecured and subordinated to senior debt
holders and secured creditors. If the issuer of a high risk, high-yield security
(junk bonds) owned by Series C defaults, Series C may incur additional expenses
to seek recovery. In addition, periods of economic uncertainty and changes can
be expected to result in increased volatility of market prices of these
securities and Series C's net asset value. Furthermore, in the case of high
risk, high-yield securities (junk bonds) structured as zero coupon or
pay-in-kind securities, their market prices are affected to a greater extent by
interest rate changes and thereby tend to be more speculative and volatile than
securities which pay interest periodically and in cash.
(2) Payment Expectations. High risk, high-yield securities (junk bonds),
like other debt instruments, present risks based on payment expectations. For
example, these securities may contain redemption or call provisions. If an
issuer exercises these provisions in a declining interest rate market, Series C
may have to replace the securities with a lower yielding security, resulting in
a decreased return for investors. Also, the value of these securities may
decrease in a rising interest rate market. In addition, there is a higher risk
of non-payment of interest and/or principal by issuers of these securities
than in the case of investment grade bonds.
(3) Liquidity and Valuation Risks. Some high risk, high-yield securities
(junk bonds) are traded among a small number of broker-dealers rather than in a
broad secondary market. Many of these securities may not be as liquid as
investment grade bonds. The ability to value or sell these securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease or increase the value and liquidity of these
securities more than other securities, especially in a thinly-traded market.
(4) Limitations of Credit Ratings. The credit ratings assigned to high
risk, high-yield securities (junk bonds) may not accurately reflect the true
risks of an investment. Credit ratings typically evaluate the safety of
principal and interest payments rather than the market value risk of such
securities. In addition, credit agencies may fail to adjust credit ratings to
reflect rapid changes in economic or company conditions that affect a security's
market value. Although the ratings of recognized rating services such as Moody's
Investors Service, Inc. and Standard & Poor's Corporation are considered, the
Investment Adviser primarily relies on its own credit analysis which includes a
study of existing debt, capital structure, ability to service debts and to pay
dividends, the issuer's sensitivity to economic conditions, its operating
history and the current trend of earnings. Thus the achievement of Series C's
investment objective may be more dependent on the Investment Adviser's own
credit analysis than might be the case for a fund which does not invest in these
securities.
(5) Legislation. Legislation may have a negative impact on the market for
high risk, high-yield securities (junk bonds), such as legislation requiring
federally-insured savings and loan associations to divest themselves of their
investments in these securities.
Zero Coupon and Pay-in-Kind Securities
Series C may invest in zero coupon securities and pay-in-kind securities. In
addition, Series C may invest in STRIPS (Separate Trading of Registered Interest
and Principal of Securities). Zero coupon or deferred interest securities are
debt obligations that do not entitle the holder to any periodic payment of
interest prior to maturity or a specified date when the securities begin paying
current interest (the "cash payment date") and therefore are issued and traded
at a discount from their face amounts or par value. The discount varies,
depending on the time remaining until maturity or cash payment date, prevailing
interest rates, liquidity of the security and the perceived credit quality of
the issuer. The discount, in the absence of financial difficulties of the
issuer, decreases as the final maturity or cash payment date of the security
approaches. STRIPS are created by the Federal Reserve Bank by separating the
interest and principal components of an outstanding U.S. Treasury bond and
selling them as individual securities. The market prices of zero coupon, STRIPS
and deferred interest securities generally are more volatile than the market
prices of securities with similar maturities that pay interest periodically and
are likely to respond to changes in interest rates to a greater degree than do
non-zero coupon securities having similar maturities and credit quality.
The risks associated with lower-rated debt securities apply to these securities.
Zero coupon and pay-in-kind securities are also subject to the risk that in the
event of a default, Series C may realize no return on its investment, because
these securities do not pay cash interest.
Convertibles
A convertible bond or convertible preferred stock gives the holder the option of
converting these securities into common stock. Some convertible securities
contain a call feature whereby the issuer may redeem the security at a
stipulated price, thereby limiting the possible appreciation.
Warrants
Warrants allow the holder to subscribe for new shares in the issuing company
within a specified time period, according to a predetermined formula governing
the number of shares per warrant and the price to be paid for those shares.
Warrants may be issued separately or in association with a new issue of bonds,
preferred stock, common stock or other securities.
Covered warrants allow the holder to purchase existing shares in the issuing
company, or in a company associated with the issuer, or in a company in which
the issuer has or may have a share stake which covers all or part of the
warrants' subscription rights.
When-Issued or Delayed-Delivery Securities
During any period that Series C has outstanding a commitment to purchase
securities on a when-issued or delayed-delivery basis, Series C will maintain a
segregated account consisting of cash, U.S. Government securities or other
high-quality debt obligations with its custodian bank. To the extent that the
market value of securities held in this segregated account falls below the
amount that Series C will be required to pay on settlement, additional assets
may be required to be added to the segregated account. Such segregated accounts
could affect Series C's liquidity and ability to manage its portfolio. When
Series C engages in when-issued or delayed-delivery transactions, it is
effectively relying on the seller of such securities to consummate the trade;
failure of the seller to do so may result in Series C's incurring a loss or
missing an opportunity to invest securities held in the segregated account more
advantageously. Series C will not pay for securities purchased on a when-issued
or delayed-delivery basis, or start earning interest on such securities, until
the securities are actually received. However, any security so purchased will be
recorded as an asset of Series C at the time the commitment is made. Because the
market value of securities purchased on a when-issued or delayed-delivery basis
may increase or decrease prior to settlement as a result of changes in interest
rates or other factors, such securities will be subject to changes in market
value prior to settlement and a loss may be incurred if the value of the
security to be purchased declines prior to settlement.
Portfolio Turnover
Series C's policies on portfolio turnover are discussed in the prospectus.
THE ASSET ALLOCATION PROCESS
The initial allocation of the Series C Assets between the Equity Component and
the Fixed Component will be determined principally by the prevailing level of
interest rates, and the volatility of the stock market, at the beginning of the
Guaranteed Period. In periods of high interest rates, fewer Assets have to be
allocated to the Fixed Component to provide the necessary assurances for meeting
the minimum targeted rate of return.
ALIAC, with the assistance of the proprietary software program, reallocates
assets as needed between the Equity Component and the Fixed Component so that if
the value of the Equity Component were to decline by 30% in a single day, a
complete reallocation to the Fixed Component might occur to ensure that the
minimum targeted rate of return would be achieved at the end of the Guaranteed
Period. While the performance of the Equity Component may be better or worse
than the performance of major stock market indices such as the Dow Jones
Industrial Average and the Standard and Poor's 500 Stock Index, neither of those
indices has declined as much as 30% in a single day since 1929. There can be no
assurance that a decline of 30% or more will not occur during the Guaranteed
Period.
The asset allocation process will also be affected by ALIAC's ability to manage
the Fixed Component. If the Fixed Component provides a return better than that
assumed by the proprietary software model, less Assets will have to be allocated
to the Fixed Component. On the other hand, if the Fixed Component performance is
poorer than expected (as might happen if there were a default on one or more
securities held in the Fixed Component), more Assets would have to be allocated
to the Fixed Component, and the ability of Series C to participate in any
subsequent upward movement in the equities market would be more limited.
The process of asset reallocation results in additional transaction costs such
as brokerage commissions. To moderate such costs, ALIAC has built into the
proprietary software program a factor which will require reallocations only when
Equity Component and Fixed Component values have deviated by more than certain
minimal amounts since the last reallocation.
TRUSTEES AND OFFICERS OF THE TRUST
The investments and administration of the Trust are under the direction of the
Board of Trustees. The Trustees and executive officers of the Trust and their
principal occupations for the past five years are listed below. Those Trustees
who are "interested persons," as defined in the 1940 Act, are indicated by an
asterisk (*). All Trustees and officers hold similar positions with other
investment companies in the same Fund Complex managed by ALIAC as the Investment
Adviser. The Fund Complex presently consists of Aetna Series Fund, Inc., Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund (Series B), Aetna Generation Portfolios,
Inc. and Aetna Variable Portfolios, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Occupation During Past Five Years
Position(s) (and Positions held with Affiliated Persons
Held with or Principal Underwriters of the
Name, Address and Age Registrant Registrant)
Shaun P. Mathews* Trustee and Chief Executive, Aetna Investment Services,
151 Farmington Avenue President Inc., October, 1995 to Present; President,
Hartford, Connecticut Aetna Investment Services, Inc., March, 1994
Age 40 to Present; Director and Chief Operations
Officer, Aetna Investment Services, Inc.,
July 1993 to Present; Director and
Senior Vice President, Aetna Insurance
Company of America, February 1993
to Present; Senior Vice President and
Director of Aetna Life Insurance and
Annuity Company ("ALIAC"), March 1991 to
Present; Vice President of Aetna Life
Insurance Company, 1991 to Present.
James C. Hamilton Vice President Chief Financial Officer, Aetna Investment
151 Farmington Avenue and Treasurer Services, Inc., July 1993 to Present;
Hartford, Connecticut Director, Vice President and
Age 54 Treasurer, Aetna Insurance Company of
America, February 1993 to Present;
Director, Aetna Private Capital,
Inc., November 1990 to Present;
Vice President and Treasurer of
ALIAC, October 1988 to Present;
Vice President and Actuary,
Aetna Life Insurance Company, 1988
to Present.
Susan E. Bryant Secretary Counsel, ALIAC and Aetna Life and Casualty
151 Farmington Avenue Company, March 1993 to Present; General
Hartford, Connecticut Counsel and Corporate Secretary, First
Age 48 Investors Cor poration, April 1991 to March
1993.
Morton Ehrlich Trustee Chairman and Chief Executive Officer,
1000 Venetian Way Integrated Management Corp. (an entrepre-
Miami, Florida neurial company) and Universal Research
Age 61 Technologies, January 1992 to Present;
Director and Chairman, Audit Committee,
National Bureau of Economic Research,
1985 to 1992; President, LIFECO Travel
Services Corp., October 1988 to December
1991.
Maria T. Fighetti Trustee Attorney, New York City Department of
325 Piermont Road Mental Health, 1973 to Present.
Closter, New Jersey
Age 52
David L. Grove Trustee Private Investor; Economic/Financial Con-
5 The Knoll sultant, December 1988 to Present.
Armonk, New York
Age 77
Timothy A. Holt* Trustee Director, Aeltus, April, 1996 to Present.
151 Farmington Avenue Director, Senior Vice President and Chief
Hartford, Connecticut Financial Officer, ALIAC, February 1996 to
Age 43 Present; Senior Vice President, Business
Strategy & Finance, Aetna Retirement
Services, Inc., February 1996 to Present;
Vice President, Portfolio Management/
Investment Group, Aetna Life and Casualty
Company, August 1992 to February 1996; Vice
President - Finance and Treasurer,
Aetna Life and Casualty Company, August, 1989
through July, 1991; Treasurer, Aetna Capital
Management, Inc., February 1990 to June 1991.
Daniel P. Kearney* Trustee Chairman (since February 1996), Director
151 Farmington Avenue (since March 1991) and President (since
Hartford, Connecticut March 1994), ALIAC; Executive Vice President
Age 56 (since December 1993), and Group Executive,
Investment Division (from February 1991 to
December 1993), Aetna Life and Casualty
Company. Director, Aeltus, April, 1996
to Present.
Sidney Koch Trustee Senior Adviser, Hambro America, Inc.,
455 East 86th Street January, 1993 to Present; Senior Adviser,
New York, New York Daiwa Securities America, Inc. January 1991
Age 60 to January 1993.
Corine T. Norgaard** Trustee, Chair Dean of the School of Management, State
School of Management Audit Committee University of New York (Binghamton), August
Binghamton University and Contract 1993 to Present; Professor, Accounting,
Binghamton, New York Committee University of Connecticut (Storrs,
Age 58 Connecticut), September 1969 to June 1993;
Director, The Advest Group, Inc. (holding
company for brokerage firm) from August,
1983 to Present.
Richard G. Scheide Trustee Private Banking Consultant, July 1992 to
11 Lily Street Present; Consultant, Fleet Bank, from July
Nantucket, Massachusetts 1991 to July 1992; Executive Vice President
Age 66 and Manager, Trust and Private Banking, Bank
of New England, N.A., and Bank of New
England Company, June 1976 to July 1991.
<FN>
** Dr. Norgaard is a director of a holding company that has as a
subsidiary a broker-dealer that sells Contracts for ALIAC. Series C is offered
as an investment option under the Contracts. Her position as a Trustee of the
holding company may cause her to be an "interested person" for purposes of the
1940 Act.
</TABLE>
During the year ended December 31, 1995, members of the Boards of the Funds
within the Aetna Fund Complex who are also directors, officers or employees of
Aetna Life and Casualty Company and its affiliates were not entitled to any
compensation from the Funds. Effective November 1, 1995, members of the Boards
who are not affiliated as employees of Aetna or its subsidiaries are entitled to
receive an annual retainer of $30,000 for service on the Boards of the Funds
within the Aetna Fund Complex. In addition, each such member will receive a fee
of $5,000 per meeting for each regularly scheduled Board meeting; $5,000 for
each Contract Committee meeting which is held on any day on which a regular
Board meeting is not scheduled; and $3,000 for each committee meeting other than
for a Contract Committee meeting on any day on which a regular Board meeting is
not scheduled. A Committee Chairperson fee of $2,000 each will be paid to the
Chairperson of the Contract and Audit Committees. All of the above fees are to
be allocated proportionately to each Fund within the Aetna Fund Complex based on
the net assets of the Fund as of the date compensation is earned.
<TABLE>
<CAPTION>
<S> <C> <C>
Total Compensation from
Aggregate Compensa- Registrant and Fund
Name of Person, Position tion from Registrant Complex Paid to Trustees
Corine Norgaard $-0- $51,000
Trustee and Chairman,
Audit and Contract Committees
Sidney Koch $-0- $47,000
Trustee and Member,
Audit and Contract Committees
Maria T. Fighetti $-0- $46,000
Trustee and Member,
Audit and Contract Committees
Morton Ehrlich $-0- $46,000
Trustee and Member,
Audit and Contract Committees
Richard G. Scheide $-0- $46,500
Trustee and Member,
Audit and Contract Committees
David L. Grove $-0- $46,500*
Trustee and Member,
Audit and Contract Committees
<FN>
* Mr. Grove elected to defer all such compensation.
</TABLE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
Shares of Series C will be owned by ALIAC as the depositor of separate accounts
which are used to fund variable annuity contracts ("VA Contracts") and variable
life insurance policies ("VLI Policies"). It is currently expected that all
shares will be held by separate accounts of ALIAC. See "Voting Rights" below.
ALIAC is a wholly-owned subsidiary of Aetna Retirement Holdings, Inc., which is
in turn a wholly-owned subsidiary of Aetna Retirement Services, Inc., which is
in turn a direct wholly-owned subsidiary of Aetna Life and Casualty Company.
ALIAC's principal office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156. ALIAC is registered with the SEC as an investment adviser and
manages over $22 billion in assets.
THE INVESTMENT ADVISORY AGREEMENT
On ________, 1996, the Trust's Board of Trustees approved an investment advisory
agreement (Advisory Agreement) between the Trust and ALIAC for Series C.
Under the Advisory Agreement and subject to the direction of the Board of
Trustees of the Trust, the Investment Adviser has responsibility for (i)
supervising all aspects of the operations of Series C; (ii) selecting the
securities to be purchased, sold or exchanged by Series C or otherwise
represented in its investment portfolio, placing trades for all such securities
and regulatory reporting thereon to the Board of Trustees; (iii) formulating and
implementing continuing programs for the purchase and sale of securities; (iv)
obtaining and evaluating pertinent information about significant developments
and economic, statistical and financial data, domestic foreign or otherwise,
whether affecting the economy generally, Series C, securities held by or under
consideration for Series C, or the issuers of those securities; (v) providing
economic research and securities analyses as the Investment Adviser considers
necessary or advisable in connection with the Investment Adviser's performance
of its duties thereunder; (vi) obtaining the services of, contracting with, and
providing instructions to custodians and/or sub-custodians of Series C's
securities, transfer agents, dividend paying agents, pricing services and other
service providers as are necessary to carry out the terms of the Agreement;
(vii) preparing financial and performance reports, calculating and reporting
daily net asset values, and preparing any other financial data or reports, as
the Investment Adviser from time to time, deems necessary or as is requested by
the Trustees; and (viii) taking any other actions which appear to the Investment
Adviser and the Trustees to be necessary.
The Advisory Agreement provides that ALIAC shall pay (a) the salaries,
employment benefits and other related costs of those of its personnel engaged in
providing investment advice to the Trust, including, without limitation, office
space, office equipment, telephone and postage costs and (b) any fees and
expenses of all Trustees, officers and employees, if any, of the Trust who are
employees of ALIAC or an affiliated entity and any salaries and employment
benefits payable to those persons. The Advisory Agreement provides that Series C
will pay (i) investment advisory fees; (ii) brokers' commissions and certain
other transaction fees including the portion of such fees, if any, which is
attributable to brokerage research services; (iii) fees and expenses of the
Trust's independent auditors and outside legal counsel; (iv) expenses of
printing and distributing proxies, proxy statements, prospectuses and reports to
shareholders of the Trust, except as such expenses may be borne by the
distributor; (v) interest and taxes; (vi) fees and expenses of those of the
Trust's Trustees who are not "interested persons" (as defined by the 1940 Act)
of the Trust or ALIAC; (vii) costs and expenses of promoting the sale of shares
in Series C, including preparing prospectuses and reports to shareholders of the
Trust; (viii) administrator, transfer agent, custodian and dividend disbursing
agent fees and expenses; (ix) fees of dividend, accounting and pricing agents
appointed by Series C; (x) fees payable to the SEC or in connection with the
registration of shares of Series C under the laws of any state or territory of
the United States or the District of Columbia; (xi) fees and assessments of the
Investment Company Institute or other association memberships approved by the
Board of Trustees; (xii) such nonrecurring or extraordinary expenses as may
arise; (xiii) all other ordinary business expenses incurred in the operations of
Series C, unless specifically allocable otherwise by the Advisory Agreement;
(xiv) costs attributable to investor services, administering shareholder
accounts and handling shareholder relations; (xv) all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption; and (xvi)
insurance premiums on property or personnel (including officers and Trustees) of
the Trust which benefit the Trust. Some of the costs payable by Series C under
the Advisory Agreement are being assumed by ALIAC under the terms of the
Administrative Services Agreement (see "Administrative Services Agreement").
The Advisory Agreement provides that it will remain in effect from year-to-year
if approved annually by a majority vote of the Trustees, including a
majority of the Trustees who are not "interested persons," in person at a
meeting called for that purpose. The Advisory Agreement may be terminated as to
Series C without penalty at any time on sixty days' written notice by (i) the
Trustees, (ii) a majority vote of the outstanding voting securities of Series C,
or (iii) the Investment Adviser. The Advisory Agreement terminates automatically
in the event of assignment.
The service mark of Series C and the name "Aetna" have been adopted by the Trust
with the permission of Aetna Life and Casualty Company and their continued use
is subject to the right of Aetna Life and Casualty Company to withdraw this
permission in the event the Investment Adviser or another subsidiary or
affiliated corporation of Aetna Life and Casualty Company should not be the
investment adviser of Series C.
THE SUB-ADVISORY AGREEMENT
On ____________, 1996, the Trust's Board of Trustees approved a sub-advisory
agreement (Sub-Advisory Agreement) between the Investment Adviser and Aeltus
Investment Management, Inc. (Aeltus) with respect to Series C. The Sub- Advisory
Agreement remains in effect from year-to-year if approved annually by a majority
vote of the Trustees, including a majority of the Trustees who are not
"interested persons," in person, at a meeting called for that purpose. The
Sub-Advisory Agreement may be terminated without penalty at any time on sixty
days' written notice by (i) the Trustees, (ii) a majority vote of the
outstanding voting securities of Series C, (iii) the Investment Adviser, or (iv)
Aeltus. The Sub-Advisory Agreement terminates automatically in the event of its
assignment or in the event of the termination of the Investment Advisory
Agreement with ALIAC.
Under the Sub-Advisory Agreement, Aeltus supervises the investment and
reinvestment of cash and securities comprising the assets of Series C. The
Sub-Advisory Agreement also directs Aeltus to (a) determine the securities to be
purchased or sold by Series C, and (b) take any actions necessary to carry out
its investment sub-advisory responsibilities.
Aeltus pays the salaries, employment benefits and other related costs of
personnel engaged in providing investment advice including office space,
facilities and equipment.
As compensation, the Investment Adviser pays the sub-adviser a monthly fee as
described in the prospectus.
The Investment Adviser has certain obligations under the Sub-Advisory Agreement
and retains overall responsibility for monitoring the investment program
maintained by Aeltus for compliance with applicable laws and regulations and
Series C's respective investment objectives. The Investment Adviser will also
obtain and evaluate data regarding economic trends in the United States and
industries in which Series C invests and consult with the sub-adviser on such
data and trends. In addition, the Investment Adviser will consult with and
assist the sub-adviser in maintaining appropriate policies, procedures and
records and oversee matters relating to promotion, marketing materials and
reports by the sub-adviser to the Trust's Board of Trustees.
THE ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to an Administrative Services Agreement, between the Trust and ALIAC,
ALIAC has agreed to provide all administrative services in support of Series C.
In addition, ALIAC has agreed to pay on behalf of Series C, all ordinary
recurring direct costs of the Portfolio that it would otherwise be required to
pay under the terms of the Investment Advisory Agreement except brokerage costs
and other transaction costs in connection with the purchase and sale of
securities for its portfolios (Transaction Costs). As a result, Series C's costs
and fees are limited to its advisory fee, the administrative services charge and
Transaction Costs. For the services under the Administrative Services Agreement,
ALIAC will receive an annual fee, payable monthly, at a rate of 0.15% of the
average daily net assets of Series C.
The Administrative Services Agreement will remain in effect until __________,
1997. It will then remain in effect from year-to-year if approved annually by a
majority of the Trustees. It may be terminated by either party on sixty days'
written notice.
CUSTODIAN
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, PA, 15258 serves as
custodian for the assets of Series C. The custodian does not participate in
determining the investment policies of Series C or in deciding which securities
are purchased or sold by Series C. Series C, however, may invest in obligations
of the custodian and may purchase or sell securities from or to the custodian.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, Hartford, Connecticut 06103 will serve as independent
auditors to Series C. KPMG Peat Marwick LLP provides audit services, assistance
and consultation in connection with SEC filings.
PRINCIPAL UNDERWRITER
ALIAC has agreed to use its best efforts to distribute the shares as the
principal underwriter of Series C pursuant to an Underwriting Agreement between
it and the Trust. The Agreement was approved on __________ to continue through
__________. The Underwriting Agreement may be continued from year to year if
approved annually by the Trustees or by a vote of holders of a majority of
Series C's shares, and by a vote of a majority of the Trustees who are not
"interested persons," as that term is defined in the 1940 Act, of ALIAC, and who
are not interested persons of the Trust, appearing in person at a meeting called
for the purpose of approving such Agreement. This Agreement terminates
automatically upon assignment, and may be terminated at any time on sixty (60)
days' written notice by the Trustees or ALIAC or by vote of holders of a
majority of Series C's shares without the payment of any penalty.
BROKERAGE ALLOCATION AND TRADING POLICIES
Subject to the direction of the Trustees, ALIAC and Aeltus have responsibility
for making Series C's investment decisions, for effecting the execution of
trades for Series C and for negotiating any brokerage commissions thereof. It is
the policy of ALIAC and Aeltus to obtain the best quality of execution
available, giving attention to net price (including commissions where
applicable), execution capability (including the adequacy of a brokerage
firm's capital position), research and other services related to execution; the
relative priority given to these factors will depend on all of the circumstances
regarding a specific trade.
In implementing their trading policy, ALIAC and Aeltus may place Series C's
transactions with such brokers or dealers and for execution in such markets as,
in the opinion of the Trust, will lead to the best overall quality of execution
for Series C.
ALIAC and Aeltus currently receive a variety of brokerage and research services
from brokerage firms in return for the execution by such brokerage firms of
trades in securities held by Series C. These brokerage and research services
include, but are not limited to, quantitative and qualitative research
information and purchase and sale recommendations regarding securities and
industries, analyses and reports covering a broad range of economic factors and
trends, statistical data relating to the strategy and performance of Series C
and other investment companies and accounts, services related to the execution
of trades in Series C's securities and advice as to the valuation of securities.
ALIAC and Aeltus consider the quantity and quality of such brokerage and
research services provided by a brokerage firm along with the nature and
difficulty of the specific transaction in negotiating commissions for trades in
Series C's securities and may pay higher commission rates than the lowest
available when it is reasonable to do so in light of the value of the brokerage
and research services received generally or in connection with a particular
transaction. ALIAC's and Aeltus' policy in selecting a broker to effect a
particular transaction is to seek to obtain "best execution," which means prompt
and efficient execution of the transaction at the best obtainable price with
payment of commissions which are reasonable in relation to the value of the
services provided by the broker, taking into consideration research and other
services provided. When the trader believes that more than one broker can
provide best execution, preference may be given to brokers who provide
additional services to ALIAC or Aeltus.
Consistent with securities laws and regulations, ALIAC and Aeltus may obtain
such brokerage and research services regardless of whether they are paid for (1)
by means of commissions; or (2) by means of separate, non-commission payments.
ALIAC's and Aeltus' judgment as to whether and how they will obtain the specific
brokerage and research services will be based upon their analysis of the quality
of such services and the cost (depending upon the various methods of payment
which may be offered by brokerage firms) and will reflect ALIAC's and Aeltus'
opinion as to which services and which means of payment are in the long-term
best interests of Series C. Series C has no present intention to effect any
brokerage transactions in portfolio securities with ALIAC or any affiliate of
Series C or ALIAC except in accordance with applicable SEC rules. All
transactions will comply with Rule 17e-1 under the 1940 Act.
Certain officers of ALIAC and Aeltus also manage the securities portfolios of
ALIAC's own accounts. Further, ALIAC and Aeltus also act as investment adviser
to other investment companies registered under the 1940 Act and other client
accounts. ALIAC and Aeltus have adopted policies designed to prevent
disadvantaging the Portfolios in placing orders for the purchase and sale of
securities for Series C.
To the extent ALIAC or Aeltus desires to buy or sell the same publicly traded
security at or about the same time for more than one client, the purchases or
sales will normally be allocated as nearly as practicable on a pro rata basis
in proportion to the amounts to be purchased or sold by each, taking into
consideration the respective investment objectives of the clients, the relative
size of portfolio holdings of the same or comparable securities, availability of
cash for investment, and the size of their respective investment commitments.
Orders for different clients received at approximately the same time may be
bunched for purposes of placing trades, as authorized by regulatory directives.
Prices are averaged for those transactions. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by Series
C or the price paid or received by Series C.
The Board of Trustees has adopted a policy allowing trades to be made between
registered investment companies provided they meet the terms of Rule 17a-7 under
the 1940 Act. Pursuant to this policy, Series C may buy a security from or sell
another security to another registered investment company advised by ALIAC.
Most purchases and sales of securities for the Fixed Component are made in
principal transactions and do not include payment of brokerage commissions.
Purchases and sales of securities for the Equity Component do involve the
payment of brokerage commissions.
The Board of Trustees has also adopted a Code of Ethics governing personal
trading by persons who manage, or who have access to trading activity by, Series
C. The Code allows trades to be made in securities that may be held by Series C,
however, it prohibits a person from taking advantage of Series C trades or from
acting on inside information. ALIAC and Aeltus have adopted Codes of Ethics
which the Board of Trustees of the Trust reviews annually.
DESCRIPTION OF SHARES
Aetna GET Fund was established under the laws of Massachusetts on March 9, 1987.
The Trust's Declaration of Trust (Declaration) permits the Trustees to issue an
unlimited number of transferable full and fractional shares of beneficial
interest without par value of a single class, each of which represents a
proportionate interest in Series C equal to each other share (see discussion in
the Prospectus under "Capital Stock"). The Trustees have the power to divide or
combine the shares of a particular series into a greater or lesser number of
shares without thereby changing the proportional beneficial interest in Series
C.
Upon liquidation of Series C, shareholders of Series C are entitled to share pro
rata in the net assets of Series C available for distribution to shareholders.
Series C shares are fully paid and nonassessable when issued.
Nothing in the Declaration protects a Trustee against any liability to which he
or she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his or her office.
SALE AND REDEMPTION OF SHARES
Shares of Series C are sold and redeemed at the net asset value next determined
after receipt of a purchase or redemption order in acceptable form as described
in the Prospectus under "Sale and Redemption of Shares" and "Net Asset Value."
NET ASSET VALUE
Securities of Series C are generally valued by independent pricing services. The
values for equity securities traded on registered securities exchanges are based
on the last sale price or, if there has been no sale that day, at the mean of
the last bid and asked price on the exchange where the security is principally
traded. Securities traded over the counter are valued at the mean of the last
bid and asked price if current market quotations are not readily available.
Short-term debt securities which have a maturity date of more than sixty days
will be valued at the mean of the last bid and asked price obtained from
principal market makers. Long-term debt securities are valued at the mean of the
last bid and asked price of such securities obtained from a broker who is a
market-maker in the securities or a service providing quotations based upon the
assessment of market-makers in those securities.
Options are valued at the mean of the last bid and asked price on the exchange
where the option is primarily traded. Stock index futures contracts and interest
rate futures contracts are valued daily at a settlement price based on rules of
the exchange where the futures contract is primarily traded.
TAX STATUS
The following is only a summary of certain additional tax considerations
generally affecting Series C and its shareholders which are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of Series C or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
Series C has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, Series C is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described in this section. Distributions by Series C made during
the taxable year or, under specified circumstances, within twelve months after
the close of the taxable year, will be considered distributions of income and
gains of the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, a regulated investment
company must (1) derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement"); and (2) derive less than 30% of its gross
income (exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the
sale or other disposition of stock, securities or foreign currencies (or
options, futures or forward contracts thereon) held for less than three months
(the "Short-Short Gain Test"). For purposes of these calculations, gross income
includes tax-exempt income. However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, Series C may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent Series C from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by Series C at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by Series C on the disposition of an asset
will be a capital gain or loss. However, gain recognized on the disposition of a
debt obligation (including municipal obligations) purchased by Series C at a
market discount (generally, at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of the market discount
which accrued during the period of time Series C held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless Series C
elects otherwise), will generally be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss recognized
by Series C on the disposition of an asset is long-term or short-term, the
holding period of the asset may be affected if (1) the asset is used to close a
"short sale" (which includes for certain purposes the acquisition of a put
option ) or is substantially identical to another asset so used, (2) the asset
is otherwise held by Series C as part of a "straddle" (which term generally
excludes a situation where the asset is stock and Series C grants a qualified
covered call option (which, among other things, must not be deep-in- the-money)
with respect thereto) or (3) the asset is stock and Series C grants an
in-the-money qualified covered call option with respect thereto. However, for
purposes of the Short-Short Gain Test, the holding period of the asset disposed
of may be reduced only in the case of clause (1) above. In addition, Series C
may be required to defer the recognition of a loss on the disposition of an
asset held as part of a straddle to the extent of any unrecognized gain on the
offsetting position.
Any gain recognized by Series C on the lapse of, or any gain or loss recognized
by Series C from a closing transaction with respect to, an option written by
Series C will be treated as a short-term capital gain or loss. For purposes of
the Short-Short Gain Test, the holding period of an option written by Series C
will commence on the date it is written and end on the date it lapses or the
date a closing transaction is entered into. Accordingly, Series C may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the
writing of options.
Transactions that may be engaged in by Series C (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last day of the taxable year, even though a taxpayer's
obligations (or rights) under such contracts have not terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is taken into account for the taxable year together with
any other gain or loss that was previously recognized upon the termination of
Section 1256 contracts during that taxable year. Any capital gain or loss for
the taxable year with respect to Section 1256 contracts (including any capital
gain or loss arising as a consequence of the year-end deemed sale of such
contracts) is generally treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. Series C, however, may elect not to have this
special tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of Series C that are not Section 1256
contracts. The IRS has held in several private rulings that gains arising from
Section 1256 contracts will be treated for purposes of the Short-Short Gain Test
as being derived from securities held for not less than three months if the
gains arise as a result of a constructive sale under Code Section 1256, provided
that the contract is actually held by the Portfolio uninterrupted for a total of
at least three months.
Because only a few regulations regarding the treatment of swap agreements and
other financial derivatives have been issued, the tax consequences of
transactions in these types of instruments are not always entirely clear. The
Trust intends to account for derivatives transactions in a manner deemed by it
to be appropriate, but the Internal Revenue Service might not necessarily accept
such treatment. If it did not, the status of a fund as a regulated investment
company and/or its compliance with the diversification requirement under Code
Section 817(h) might be affected. The Trust intends to monitor developments in
this area. Certain requirements that must be met under the Code in order for
Series C to qualify as a regulated investment company may limit the extent to
which it will be able to engage in swap agreements.
Series C may purchase securities of certain foreign investment funds or trusts
which constitute passive foreign investment companies ("PFICS") for federal
income tax purposes. If Series C invests in a PFIC, it may elect to treat the
PFIC as a qualifying electing portfolio (a "QEP") in which event Series C will
each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether Series
C receives distributions of any such ordinary earnings or capital gain from the
PFIC. If Series C does not (because it is unable to, chooses not to or
otherwise) elect to treat the PFIC as a QEP, then in general (1) any gain
recognized by Series C upon sale or other disposition of its interest in the
PFIC or any excess distribution received by Series C from the PFIC will be
allocated ratably over Series C's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in Series C's gross income for such year as ordinary income (and
the distribution of such portion by Series C to shareholders will be taxable as
an ordinary income dividend, but such portion will not be subject to tax at the
Series C level), (3) Series C shall be liable for tax on the portions of such
gain or excess distribution so allocated to prior years in an amount equal to,
for each such prior year, (i) the amount of gain or excess distribution
allocated to such prior year multiplied by the highest tax rate (individual or
corporate) in effect for such prior year plus (ii) interest on the amount
determined under clause (i) for the period from the due date for filing a return
for such prior year until the date for filing a return for the year in which the
gain is recognized or the excess distribution is received at the rates and
methods applicable to underpayments of tax for such period, and (4) the
distribution by the portfolio to shareholders of the portions of such gain or
excess distribution so allocated to prior years (net of the tax payable by
Series C thereon) will again be taxable to the shareholders as an ordinary
income dividend.
Under recently proposed Treasury Regulations Series C can elect to recognize as
gain the excess, as of the last day of its taxable year, of the fair market
value of each share of PFIC stock over Series C's adjusted tax basis in that
share ("mark to market gain"). Such mark to market gain will be included by
Series C as ordinary income, such gain will not be subject to the Short-Short
Gain Test, and Series C's holding period with respect to such PFIC stock
commences on the first day of the next taxable year. If Series C makes such
election in the first taxable year it holds PFIC stock, Series C will include
ordinary income from any mark to market gain, if any, and will not incur the tax
described in the previous paragraph.
Treasury Regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, Series C must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of Series C's
taxable year, at least 50% of the value of Series C's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which Series C has
not invested more than 5% of the value of Series C's total assets in securities
of such issuer and as to which Series C does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or of two or more issuers which Series C controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses. Generally, an option (call or put) with respect to a security is
treated as issued by the issuer of the security not the issuer of the option.
However, with regard to forward currency contracts, there does not appear to be
any formal or informal authority which identifies the issuer of such instrument.
For purposes of asset diversification testing, obligations issued or guaranteed
by agencies or instrumentalities of the U.S. Government such as the Federal
Agricultural Mortgage Corporation, the Farm Credit System Financial Assistance
Corporation, a Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Government National
Mortgage Corporation, and the Student Loan Marketing Association are treated as
U.S. Government securities.
If for any taxable year Series C does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of Series C's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Qualification of Segregated Asset Accounts
Under Code Section 817(h), a segregated asset account upon which a variable
annuity contract or variable life insurance policy is based must be "adequately
diversified." A segregated asset account will be adequately diversified if it
satisfies one of two alternative tests set forth in the Treasury Regulations.
Specifically, the Treasury Regulations provide, that except as permitted by the
"safe harbor" discussed below, as of the end of each calendar quarter (or within
30 days thereafter) no more than 55% of a Series' total assets may be
represented by any one investment, no more than 70% by any two investments, no
more than 80% by any three investments and no more than 90% by any four
investments. For this purpose, all securities of the same issuer are considered
a single investment, and while each U.S. Government agency and instrumentality
is considered a separate issuer, a particular foreign government and its
agencies, instrumentalities and political subdivisions may be considered the
same issuer. As a safe harbor, a separate account will be treated as being
adequately diversified if the diversification requirements under Subchapter M
are satisfied and no more than 55% of the value of the account's total assets
are cash and cash items, U.S. government securities and securities of other
regulated investment companies.
For purposes of these alternative diversification tests, a segregated asset
account investing in shares of a regulated investment company will be entitled
to "look through" the regulated investment company to its pro rata portion of
the regulated investment company's assets, provided the regulated investment
company satisfies certain conditions relating to the ownership of the shares.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to 98% of ordinary
taxable income for the calendar year and 98% of capital gain net income for the
one-year period ended on October 31 of such calendar year (or, at the election
of a regulated investment company having a taxable year ending November 30 or
December 31, for its taxable year (a "taxable year election")). Tax-exempt
interest on municipal obligations is not subject to the excise tax. The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall (1) reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year; and (2) exclude foreign currency
gains and losses from Section 998 transactions incurred after October 31 of any
year (or after the end of its taxable year if it has made a taxable year
election) in determining the amount of ordinary taxable income for the
current calendar year (and, instead, include such gains and losses in
determining ordinary taxable income for the succeeding calendar year).
Series C intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that Series C may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Series C Distributions
Series C anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to the
shareholders as ordinary income and treated as dividends for federal income tax
purposes, but they may qualify for the dividends-received deduction for
corporate shareholders to the extent discussed below.
Series C may either retain or distribute to the shareholders its net capital
gain for each taxable year. Series C currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to the shareholders as long-term capital gain,
regardless of the length of time the shareholders have held shares or whether
such gain was recognized by Series C prior to the date on which the shareholder
acquired the shares.
If Series C elects to retain its net capital gain, Series C will be taxed
thereon (except to the extent of any available capital loss carryovers) at the
35% corporate tax rate. Where Series C elects to retain its net capital gain, it
is expected that Series C also will elect to have shareholders of record on the
last day of its taxable year treated as if each received a distribution of its
pro rata share of such gain, with the result that each shareholder will be
required to report its pro rata share of such gain on its tax return as
long-term capital gain, will receive a refundable tax credit for its pro rata
share of tax paid by Series C on the gain, and will increase the tax basis for
its shares by an amount equal to the deemed distribution less the tax credit.
All distributions paid to ALIAC, whether characterized as ordinary income or
capital gain, are not taxable to Contract owners.
Ordinary income dividends paid by Series C with respect to a taxable year may
qualify for the dividends-received deduction generally available to corporations
(other than corporations, such as S corporations, which are not eligible for the
deduction because of their special characteristics and other than for purposes
of special taxes such as the accumulated earnings tax and the personal holding
company tax) to the extent of the amount of qualifying dividends received by
Series C from domestic corporations for the taxable year and if the shareholder
meets eligibility requirements in the Code. A dividend received by Series C will
not be treated as a qualifying dividend (1) if it has been received with respect
to any share of stock that Series C has held for less than 46 days (91 days in
the case of certain preferred stock), excluding for this purpose under the rules
of Code Section 246(c)(3) and (4): (i) any day more than 45 days (or 90 days in
the case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which Series C has an option to sell, is
under a contractual obligation to sell, has made and not closed a short sale of,
is the grantor of a deep-in-the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that
Series C is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (3) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246(a). Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed
or reduced (i) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of Series C or (ii) by application
of Code Section 246(b) which in general limits the dividends-received
deduction.
Alternative Minimum Tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. In addition, under the Superfund Amendments and Reauthorization Act of
1986, a tax is imposed for taxable years beginning after 1986 and before 1996 at
the rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined
without regard to the deduction for this tax and the AMT net operating loss
deduction) over $2 million. For purposes of the corporate AMT and the
environmental super-fund tax (which are discussed above), the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, corporate shareholders will generally be required
to take the full amount of any dividend received from Series C into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by Series C from sources within foreign
countries may be subject to foreign taxes withheld at the source. The United
States has entered into tax treaties with many foreign countries which entitle
Series C to a reduced rate of, or exemption from, taxes on such income. It is
impossible to determine the effective rate of foreign tax in advance since the
amount of a Portfolio's assets to be invested in various countries is not known.
Distributions by Series C that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and in reduction of) the shareholder's tax basis in his shares; any excess will
be treated as gain from the sale of his shares, as discussed below.
Distributions paid to shareholders are generally reinvested in additional
shares. Shareholders receiving a distribution in the form of additional shares
will be treated as receiving a distribution in an amount equal to the fair
market value of the shares received, determined as of the reinvestment date. In
addition, if the net asset value at the time a shareholder purchases shares of
Series C reflects undistributed net investment income or recognized capital gain
net income, or unrealized appreciation in the value of the assets of Series C,
distributions of such amounts will be taxable to the shareholder in the manner
described above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by Series C into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by Series C) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Sale or Redemption of Shares
Shareholders generally will recognize gain or loss on the sale or redemption of
shares of Series C in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of Series C within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of Series C will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held, or deemed under Code rules to be held, for six months
or less will be treated as a long-term capital loss to the extent of the amount
of capital gain dividends received on such shares.
Tax Effect on Contract Owners
Owners of Contracts are taxed through prior ownership of such Contracts, as
described in ALIAC's prospectus for the applicable Contract.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends, exempt- interest
dividends and capital gain dividends from regulated investment companies often
differ from the rules for U.S. federal income taxation described above.
Shareholders are urged to consult their tax advisers as to the consequences of
these and other state and local tax rules affecting investment in Series C.
VOTING RIGHTS
Shareholders are entitled to one vote for each full share held (and fractional
votes for fractional shares held) and will vote in the election of Directors (to
the extent hereinafter provided) and on other matters submitted to the vote of
the shareholders. The shareholder of Series C is ALIAC for its separate accounts
using Series C to fund Contracts. ALIAC passes voting rights attributable to
shares held for the Contracts through to Contract owners as described in the
prospectus for the applicable Contract. Voting rights are not cumulative, so
that the holders of more than 50% of the shares voting in the election of
Trustees can, if they choose to do so, elect all the Trustees, in which event
the holders of the remaining shares will be unable to elect any person as a
Trustee.
The Declaration may be amended by an affirmative vote of a majority of the
shares at any meeting of shareholders or by written instrument signed by a
majority of the Trustees and consented to by a majority of the shareholders. The
Trustees may also amend the Declaration without the vote or consent of
shareholders, if they deem it necessary to conform the Declaration to the
requirements of applicable federal laws or regulations or the requirements of
the regulated investment company provisions of the Internal Revenue Code of
1986, as amended, or to establish a new series of shares, but the Trustees shall
not be liable for failing to do so.
Shares have no preemptive or conversion rights.
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT]
PART C
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
To be filed by amendment.
b. Exhibits
(1)(a) Declaration of Trust
(b) Form of Amendment to Declaration of Trust
(2) Amended and Restated By-laws
(3) Not Applicable
(4) Not Applicable
(5)(a) Form of Investment Advisory Agreement between
Aetna Life Insurance and Annuity Company ("ALIAC")
and the Registrant
(5)(b) Form of Subadvisory Agreement between Aetna Life Insurance
and Annuity Company, the Registrant and Aeltus Investment
Management, Inc.
(6) Form of Underwriting Agreement between the Registrant and ALIAC
(7) Not Applicable
(8)(a) Custodian Agreement - Mellon Bank, N.A. and depository contracts
(8)(b) Amendment to Custodian Agreement
(9)(a) Form of Administrative Services Agreement
(9)(b) License Agreement
(10)(b) Opinion of Counsel
(11) Consent of Independent Auditors (to be filed by amendment)
(12) Not Applicable
(13) Agreement Concerning Initial Capital*
(14) Not Applicable
(15) Not Applicable
(16) Schedule for Computation of Performance Data
(17) Not Applicable
(18) Not Applicable
(19) Powers of Attorney**
(27) Financial Data Schedule (to be filed by amendment)
* Incorporated by reference to Form N-1A, File No. 33-12723 as filed with
the Securities and Exchange Commission on November 8, 1993.
** Incorporated by reference to Form N-1A, File No. 2-51739 as filed
electronically with the Securities and Exchange Commission on April 25, 1996.
Item 25. Persons Controlled by or Under Common Control
Registrant is a Massachusetts business trust for which separate financial
statements are filed. As of May 31, 1996, all of the Registrant's outstanding
shares were held in the name of Aetna Life Insurance and Annuity Company. 10,639
(0.15%) were held for its own account. The balance were held on behalf of the
following:
Aetna Variable Annuity Account B 1,111,468 15.94%
Aetna Variable Annuity Account C 5,745,497 82.38%
Aetna Variable Annuity Account D 106,615 1.53%
Aetna Life Insurance and Annuity Company is a wholly owned subsidiary of Aetna
Retirement Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna
Retirement Services, Inc. and an indirectly wholly owned subsidiary of Aetna
Life and Casualty Company.
A diagram of all persons directly or indirectly under common control with the
Registrant is incorporated herein by reference to Item 25 of Post-Effective
Amendment No. 41 to the Registration Statement on Form N-1A (File No. 2- 53058),
as filed electronically with the Securities and Exchange Commission on June 6,
1996.
Item 26. Number of Holders of Securities
None
Item 27. Indemnification
Article V of the Registrant's Declaration of Trust provides for indemnification
of trustees and officers. In addition, the Registrant's officers and trustees
are covered under a directors and officers errors and omissions liability
insurance policy issued by Gulf Insurance Company which expires in October,
1996.
The text of Massachusetts indemnification statute, Section 67, describing the
circumstances under which the Registrant may be required to indemnify its
directors, officers, or employees, as most recently amended in 1983, is as
follows:
Indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by it
to whatever extent shall be specified in or authorized by (i) the articles of
organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the holders of a majority of the shares of stock entitled to vote on
the election of directors. Except as the articles of organization or by-laws
otherwise require, indemnification of any persons referred to in the preceding
sentence who are not directors of the corporation may be provided by it to the
extent authorized by the directors. Such indemnification may include payment by
the corporation of expenses incurred in defending a civil or criminal action or
proceeding in advance of the final disposition of such action or proceeding,
upon receipt of an undertaking by the person indemnified to repay such payment
if he shall be adjudicated to be not entitled to indemnification under this
section which undertaking may be accepted without reference to the financial
ability of such person to make repayment. Any such indemnification may be
provided although the person to be indemnified is no longer an officer,
director, employee or agent of the corporation or of such other organization or
no longer serves with respect to any such employee benefit plan.
No indemnification shall be provided for any person with respect to any matter
as to which he shall have been adjudicated in any proceeding not to have acted
in good faith in the reasonable belief that his action was in the best interest
of the corporation or to the extent that such matter relates to service with
respect to an employee benefit plan, in the best interests of the participants
or beneficiaries of such employee benefit plan.
The absence of any express provisions for indemnification shall not limit any
right of indemnification existing independently of this section.
A corporation shall have power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or other agent of another organization or with
respect to any employee benefit plan, against any liability incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.
Item 28. Business and Other Connections of Investment Adviser
The Investment Adviser, Aetna Life Insurance and Annuity Company, is an
insurance company that issues variable and fixed annuities, variable and
universal life insurance policies and acts as depositor for separate accounts
holding assets for variable contracts and policies. The following table
summarizes the business connections of the directors and principal officers of
the Investment Adviser.
<TABLE>
<CAPTION>
<S> <C> <C>
Positions and Offices Other Principal Position(s) Held
Name with Investment Adviser Within Last Two Years/Addresses*/**
Daniel P. Kearney Director, President and Chairman (since February 1996), Director
Chairman, Executive (since March 1991) and President (since
Committee (Principal March 1994), ALIAC; Executive Vice President
Executive Officer) (since December 1993), and Group Executive,
Investment Division (from February 1991 to
December 1993), Aetna Life and Casualty
Company. Director, Aeltus, April, 1996
to Present.
Christopher J. Burns Director (1991); Senior Director, Aetna Financial Services,
Vice President Inc. (since January 1996); Director
(since July 1993) of Aetna
Investment Services, Inc.; Director
(1992 - April 1995) and Senior Vice
President, North American Operations
(1993 - April 1995) of Aetna
International, Inc.
Laura R. Estes Director and Senior Vice Director, Aetna Financial Services,
President Inc. (since January 1996); Director
and Senior Vice President, Aetna
Insurance Company of America (since
February 1993); Director, Aetna
Investment Services, Inc. (since
July 1993).
Timothy A. Holt Director, Senior Vice Director, Aeltus, April, 1996 to Present.
President and Chief Director, Senior Vice President and Chief
Financial Officer (1996) Financial Officer, ALIAC, February 1996 to
Present; Senior Vice President, Business
Strategy & Finance, Aetna Retirement
Services, Inc., February 1996 to Present;
Vice President, Portfolio Management/
Investment Group, Aetna Life and
Casualty Company, August 1992 to
February 1996; Vice President - Finance and
Treasurer, Aetna Life and Casualty
Company, August, 1989 through July,
1991; Treasurer, Aetna Capital
Management, Inc., February 1990 to June
1991.
Gail P. Johnson Director and Vice President Vice President, Service and Retain
Customers, Aetna Retirement Services
(since February 1996); Vice
President, Defined Benefit Services
(September 1994 - February 1996);
Vice President, Plan Services,
Pensions and Financial Services
(December 1992 - September 1994).
John Y. Kim Director and Senior Vice President, Aeltus Investment
President Management, Inc. (since December 1995);
Chief Investment Officer, Aetna
Life and Casualty Company (since
May 1994); Managing Director,
Mitchell Hutchins Institutional
Investors, New York, NY (September
1993 - April 1994).
Shaun P. Mathews Director and Vice President Chief Executive, Aetna Investment Services,
Inc., October, 1995 to Present; President,
Aetna Investment Services, Inc., March, 1994
to Present; Director and Chief Operations
Officer, Aetna Investment Services, Inc.,
July 1993 to Present; Director and Senior
Vice President, Aetna Insurance Company of
America, February 1993 to Present; Senior
Vice President and Director of ALIAC,
March 1991 to Present; Vice President of
Aetna Life Insurance Company, 1991 to
Present.
Glen Salow Director and Vice President Vice President, Information
Technology, Investment, and
Financial Services (February 1995 -
February 1996); Vice President,
Investment Systems, AIT (1992 - 1995).
Creed R. Terry Director and Vice President Vice President, Select and Managed
Markets, Aetna Retirement Services
(since February 1996); ALIAC Market
Strategist (August 1995 - February
1996); President, Chemical
Technology Corporation (a subsidiary
of Chemical Bank) (1993 - 1995).
Zoe Baird Senior Vice President and Senior Vice President and General
General Counsel Counsel of Aetna Life and Casualty
Company (since April 1992).
Susan E. Schechter Counsel and Corporate Counsel, Aetna Life and Casualty
Secretary Company (since November 1993).
Eugene M. Trovato Vice President and Vice President and Controller,
Treasurer, Corporate (February 1995 - Present), Assistant
Controller Vice President, Planning, Reporting,
and Analysis (October 1992 - February
1995), Aetna Life Insurance and Annuity
Company.
Diane B. Horn Vice President and Chief Senior Compliance Officer (August 1993
Compliance Officer - Present) Aetna Life Insurance and
Annuity Company and Aetna Life Insurance
Company.
<FN>
* The principal business address of each person named is 151 Farmington
Avenue, Hartford, Connecticut 06156.
** Certain officers and directors of the investment adviser currently hold (or
have held during the past two years) other positions with affiliates of the
Registrant which are not deemed to be principal positions.
</TABLE>
Item 29. Principal Underwriters
(a) In addition to serving as the principal underwriter for the Registrant,
Aetna Life Insurance and Annuity Company (ALIAC) also acts as the principal
underwriter for Aetna Variable Fund; Aetna Series Fund, Inc.; Aetna Generation
Portfolios, Inc.; Aetna Variable Portfolios, Inc., Aetna Variable Encore Fund,
Aetna Income Shares, Aetna Investment Advisers Fund, Inc., Variable Life Account
B and Variable Annuity Accounts B, C and G (separate accounts of ALIAC
registered as unit investment trusts), and Variable Annuity Account I (a
separate account of Aetna Insurance Company of America registered as a unit
investment trust). Additionally, ALIAC is the investment adviser for Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Series B of Aetna GET Fund, Aetna Series Fund, Inc., Aetna
Generation Portfolios, Inc. and Aetna Variable Portfolios, Inc. ALIAC also the
depositor of Variable Life Account B and Variable Annuity Accounts B, C and G.
(b) The following are the directors and principal officers of the
Underwriter:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
Daniel P. Kearney Director and President Director
Timothy A. Holt Director, Senior Vice President Director
and Chief Financial Officer
Christopher J. Burns Director and Senior Vice President None
Laura R. Estes Director and Senior Vice President None
Gail P. Johnson Director and Vice President None
John Y. Kim Director and Senior Vice President None
Shaun P. Mathews Director and Vice President Director and President
Glen Salow Director and Vice President None
Creed R. Terry Director and Vice President None
Zoe Baird Senior Vice President and General None
Counsel
Susan E. Schechter Corporate Secretary and Counsel None
Eugene M. Trovato Vice President and Treasurer, None
Corporate Controller
Diane B. Horn Vice President and Chief Compliance None
Officer
<FN>
* The principal business address of all directors and officers listed is
151 Farmington Avenue, Hartford, Connecticut 06156.
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records
As required by Section 31(a) of the 1940 Act and the Rules promulgated
thereunder, the Registrant and its investment adviser, ALIAC, maintain physical
possession of each account, book or other documents at its principal offices at
151 Farmington Avenue, Hartford, Connecticut 06156.
Item 31. Management Services
Not Applicable
Item 32. Undertakings
The Registrant undertakes that if requested by the holders of at least 10% of a
Portfolio's outstanding shares, the Registrant will hold a shareholder meeting
for the purpose of voting on the removal of one or more Directors and will
assist with communication concerning that shareholder meeting as if Section
16(c) of the Investment Company Act of 1940 applied.
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the portfolio's latest annual report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940,
the Registrant has duly caused this Post-Effective Amendment No. 8 to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Hartford, and State of Connecticut, on the 13th
day of June, 1996.
AETNA GET FUND
--------------------------------------
Registrant
By Shaun P. Mathews*
-----------------------------------
Shaun P. Mathews
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 8 to the Registration Statement has been signed
below by the following persons on June 13, 1996 in the capacities indicated.
Signature and Title
<TABLE>
<CAPTION>
<S> <C>
Shaun P. Mathews* President and Trustee
Shaun P. Mathews (Principal Executive Officer)
Vice President and Treasurer
James C. Hamilton* (Principal Financial and
James C. Hamilton Accounting Officer)
Morton Ehrlich* Trustee
Morton Ehrlich
Maria T. Fighetti* Trustee
Maria T. Fighetti
David L. Grove* Trustee
David L. Grove
Daniel P. Kearney* Trustee
Daniel P. Kearney
Trustee
Timothy A. Holt
Sidney Koch* Trustee
Sidney Koch
Corine T. Norgaard* Trustee
Corine T. Norgaard
Richard G. Scheide* Trustee
Richard G. Scheide
</TABLE>
By: /S/ SUSAN E. BRYANT
--------------------------
* Susan E. Bryant
Attorney-in-Fact
AETNA GET FUND
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ---------- ------- ----
99-b(1)(a) Declaration of Trust
99-b(1)(b) Form of Amendment to Declaration of Trust
99-b(2) Amended and Restated By-laws
99-b(5)(a) Form of Investment Advisory Agreement between
Aetna Life Insurance and Annuity Company
("ALIAC") and the Registrant
99-b(5)(b) Form of Subadvisory Agreement between Aetna Life
Insurance and Annuity Company, the Registrant and
Aeltus Investment Management, Inc.
99-b(6) Form of Underwriting Agreement between the Registrant
and ALIAC
99-b(8)(a) Custodian Agreement
99-b(8)(b) Amendment to Custodian Agreement
99-b(9)(a) Form of Administrative Services Agreement
99-b(9)(b) License Agreement
99-b(10)(b) Opinion of Counsel
99-b(16) Schedule for Computation of Performance Data
DECLARATION OF TRUST
OF
AETNA GUARANTEED EQUITY TRUST
TABLE OF CONTENTS
Page
ARTICLE I
THE TRUST
1.1. Name
1.2. Definitions
ARTICLE II
BOARD OF TRUSTEES
2.1. Number; Service
2.2. Election of Trustees at the First Meeting of Shareholders
2.3. Term of Office of Trustees
2.4. Termination of Service and Appointment of Trustees
2 5. By-Laws
2.6. Officers
ARTICLE III
POWERS OF TRUSTEES
3.1. General
3.2. Investments
3.3. Legal Title
3.5. Delegation; Committees
3.6. Collection and Payment
3.8. Miscellaneous Powers
3.9. Further Powers
ARTICLE IV
ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
4.1. Advisory and Management Arrangements
4.2. Distribution Arrangements
4.3 Parties to Contract
4.4. Provisions for Amendments
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
5.1. No Personal Liability of Shareholders, Trustees, etc
5.2. Non-Liability of Trustees, and Others
5.3. Indemnification
5.4. No Bond Required of Trustees
5.5. No Duty of Investigation; Notice in Trust Instruments
5.6. Reliance on Experts
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
6.1. Beneficial Interest
6.2. Series Designation
6.3. Rights of Shareholders
6.4. Trust Only
6.5. Issuance of Shares
6.6. Reqister of Shares
6.7. Transfer of Shares
ARTICLE VII
CUSTODIANS
7.1. Appointment and Duties
7.2. Central Certificate System
ARTICLE VIII
REDEMPTION
8.1. Redemptions
8.2 Involuntary Redemption of Shares; Disclosure of Holding
ARTICLE IX
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
9.1. Net Asset Value
9.2. Distributions to Shareholders
9.3. Power to Modify Foregoing Procedures
ARTICLE X
SHAREHOLDERS
10.1. Meetings of Shareholders
10.2. Voting Powers
10.3. Notice of Meetings
10.4. Record Date for Meetings
10.5. Proxies
10.6. Reports
10.7. Inspection of Records
10.8. Shareholder Action by Written Consent
ARTICLE XI
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
11.1. Duration
11.2. Termination
11.3. Amendment Procedure
11.4. Merger, Consolidation and Sale of Assets
ARTICLE XII
MISCELLANEOUS
12.1. Notices
12.2. Filing
12.3. Resident Agent
12.4. Governing Law
12.5. Reliance by Third Parties
12.6. Provisions in Conflict With Law or Regulations
12.7. Trust Name
DECLARATION OF TRUST
OF
AETNA GUARANTEED EQUITY TRUST
THE DECLARATION OF TRUST of Aetna Guaranteed Equity Trust (the "Trust") is made
the 9th day of March, 1987 by the parties signatory hereto, as trustees (the
"Trustees").
W I T N E S S E T H :
WHEREAS, The Trustees desire to form a trust fund, Aetna Guaranteed Equity
Trust, as a Massachusetts Business Trust; and
WHEREAS, the Trustees desire to use the Trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest which may, at the
discretion of the Trustees, be divided into separate series as herein provided;
NOW, THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST for the benefit of the holders from time to time
of the shares of beneficial interest issued hereunder as herein set forth below.
ARTICLE I
THE TRUST
1.1. Name
The name of the trust created hereby (the "Trust", which term shall be deemed to
include any Series of the Trust when the context requires) shall be "Aetna
Guaranteed Equity Trust", and so far as may be practicable the Trustees shall
conduct the activities of the Trust, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall refer to the Trustees as Trustees, and not individually, and shall not
refer to the officers, agents, employees or Shareholders of the Trust or any
Series thereof. Each Series of the Trust which shall be established and
designated by the Trustees pursuant to Section 6.2 shall conduct its activities
under such name as the Trustees shall determine and set forth in the instrument
establishing such Series. Should the Trustees determine that the use of the name
of the Trust or any Series is not advisable, they may select such other name for
the Trust or such Series as they deem proper and the Trust or Series may conduct
its activities under such other name. Any name change shall be effective upon
the execution by a majority of the then Trustees of an instrument setting forth
the new name. Any such instrument shall have the status of an amendment to this
Declaration of Trust.
1.2. Definitions
As used in this Declaration of Trust, the following terms shall have the
following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a) (42) of the Investment Company Act of 1940, whichever
may be applicable) and "Principal Underwriter" shall have the meanings given
them in the Investment Company Act of 1940, as amended from time to time.
"Declaration" shall mean this Declaration of Trust as amended from time to
time.
"Fundamental Policies" shall mean the investment restrictions set forth in
the Prospectus and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of any Series of
the Trust under the Securities Act of 1933, as amended.
"Series" shall mean the separate series that may be established and
designated pursuant to Section 6.2.
"Shareholders" shall mean all holders of record of outstanding Shares.
"Shares" means the equal proportionate units of interest into which the
beneficial interest in any Series of the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares. All reference to
Shares shall be deemed to be Shares of any or all Series as the context may
require.
"Trustees" refer to the individual Trustees in their capacity as Trustees
hereunder of the Trust and their successor or successors for the time being in
office as such Trustees.
"Trust Property" shall mean all property, real or personal, tangible or
intangible, owned or held by or for the account of the Trust.
The "1940 Act" refers to the Investment Company Act of 1940 and the
regulations promulgated thereunder, as amended from time to time.
ARTICLE II
BOARD OF TRUSTEES
2.1. Number; Service
The Board of Trustees shall consist of not less than three and not more than
fifteen Trustees as determined by vote of the Board, or in the absence thereof,
shall consist of the number of Trustees last elected at a meeting of
Shareholders. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry out
that responsibility. The Trustees who shall serve until the election of Trustees
at the first Meeting of Shareholders shall be Donald G. Conrad, David L. Grove,
James E. Mulvihill, Corine T. Norgaard and Dean E. Wolcott.
2.2. Election of Trustees at the First Meeting of Shareholders
At the first meeting of Shareholders, on a date fixed by the Trustees, the
Shareholders shall elect Trustees.
2.3. Term of Office of Trustees
The Trustees shall hold office during the lifetime of this Trust, and until its
termination as hereinafter provided; except (a) that any Trustee may resign his
or her trust by written instrument signed by him or her and delivered to the
other Trustees, which shall take effect upon such delivery or upon such later
date as is specified therein; (b) that any Trustee may be removed at any time by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal, specifying the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has become
mentally or physically incapacitated may be retired by written instrument signed
by a majority of the other Trustees, specifying the date of his or her
retirement; and (d) a Trustee may be removed at any special meeting of
Shareholders of the Trust by a vote of two-thirds of the outstanding Shares or
by written instrument signed by the holders of at least two-thirds of the
outstanding shares.
2.4. Termination of Service and Appointment of Trustees
In case of the death, resignation, retirement, removal or mental or physical
incapacity of any of the Trustees, or in case a vacancy shall, by reason of an
increase in number, or for any other reason, exist, the remaining Trustees shall
fill such vacancy by appointing such other person as they in their discretion
shall see fit. Such appointment shall be effected by the signing of a written
instrument by a majority of the Trustees in office. Within three months of such
appointment, the Trustees shall cause notice of such appointment to be mailed to
each Shareholder at his address as recorded on the books of the Trust. An
appointment of a Trustee may be made by the Trustees then in office and notice
thereof mailed to Shareholders as aforesaid in anticipation of a vacancy to
occur by reason of retirement, resignation or increase in number of Trustees
effective at a later date, provided that said appointment shall become effective
only at or after the effective date of said retirement, resignation or increase
in the number of Trustees. As soon as any Trustee so appointed shall have
accepted this Trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or conveyance.
Any appointment authorized by this Section 2.4 is subject to the provisions of
Section 16(a) of the 1940 Act.
2 5. By-Laws
The Trustees may adopt and from time to time or amend or repeal By-Laws for the
conduct of the business of the Trust.
2.6. Officers
The Trustees shall annually elect a President, one or more Vice-Presidents, a
Secretary and a Treasurer and may elect such other officers as they deem
appropriate. The Trustees may authorize the President or any Vice President to
appoint such other officers or agents with such powers as the Trustees may deem
to be advisable. The President shall be a Trustee. The general powers of the
officers shall be set forth in the By-Laws.
ARTICLE III
POWERS OF TRUSTEES
3.1. General
The Trustees shall have exclusive and absolute control over the Trust Property
and over the business of the Trust or any Series thereof to the same extent as
if the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting such discretion and power. Such
powers of the Trustees may be exercised without order of or resort to any court.
3.2. Investments
The Trustees shall have power, subject to any applicable limitation in this
Declaration of Trust and in the By-Laws of the Trust, to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in
or dispose of negotiable or non-negotiable instruments, obligations, evidences
of indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, preferred and common
stocks, futures contracts and options to buy or sell futures contracts and other
securities, including, without limitation, options to buy or sell securities,
securities issued, guaranteed or sponsored by any state, territory or possession
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States Government
or by any bank, savings institution, corporation or other business entity
organized under the laws of the United States and, to the extent provided in the
Prospectus and not prohibited by the Fundamental Policies, organized under
foreign laws; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of every kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said instruments; and the Trustees shall be
deemed to have the foregoing powers with respect to any additional securities in
which any Series of the Trust may invest should the investment policies set
forth in the Prospectuses or the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust or any Series, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title
Legal title to all the Trust Property shall be vested in the Trustees as joint
tenants except that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees, or
in the name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust or any Series thereof is
appropriately protected.
Upon the resignation, removal or death of a Trustee, that Trustee shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
3.4. Borrow Money
Subject to the Fundamental Policies and the Trust By-Laws, the Trustees shall
have power to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the Trust
or any Series thereof, including the lending of portfolio securities, and to
endorse, guarantee, or undertake the performance of any obligation, contract or
engagement of any other person, firm, association or corporation.
3.5. Delegation; Committees
The Trustees shall have power, consistent with their continuing exclusive
authority over the management of the Trust and the Trust Property, to delegate
to committees of Trustees or to officers, employees or agents of the Trust, the
doing of such things and the execution of such instruments as the Trustees may
deem expedient, to the same extent as such delegation is permitted to directors
of a Massachusetts business corporation and is permitted by the 1940 Act.
3.6. Collection and Payment
The Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust or any Series thereof; and to enter into releases,
agreements and other instruments.
3.7. Expenses
The Trustees shall have power to incur and pay any expenses which in the opinion
of the Trustees are necessary to carry out any of the purposes of this
Declaration, and to charge or allocate the same to, between or among such one or
more of the Series that may be established and designated pursuant to Section
6.2, as the Trustees deem fair, and to pay reasonable compensation from the
funds of the Trust to themselves as Trustees. The Trustees may pay themselves
such compensation for special services, including legal, underwriting,
syndicating and brokerage services, as they in good faith may deem reasonable,
as well as reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
3.8. Miscellaneous Powers
The Trustees shall have the power to: (a) employ or contract with such Persons
as the Trustees may deem desirable for the transaction of the business of the
Trust or any Series thereof, provided that the selection and retention of
independent public accountants be done in a manner consistent with the 1940 Act;
(b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust or any Series thereof against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust (e) to the extent permitted by law and the By-Laws
indemnify any Person with whom the Trust or any Series thereof has dealings,
including any adviser, administrator, manager, underwriter, transfer agent,
custodian and selected dealers with respect to any Series, to such extent as the
Trustees shall determine; (f) guarantee indebtedness or contractual obligations
of others; and (g) determine and change the fiscal year of the Trust and the
method in which its accounts shall be kept.
3.9. Further Powers
The Trustees shall have power to conduct the business of the Trust and carry on
its operations in any and all of its branches and maintain offices in any and
all states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust, made by the Trustees
in good faith shall be conclusive. The Trustees will not be required to obtain
any court order to deal with the Trust Property.
ARTICLE IV
ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
4.1. Advisory and Management Arrangements
Subject to a Majority Shareholder Vote, the Trustees may in their discretion
enter into advisory, administration or management contracts whereby the other
party to such contract shall undertake to furnish the Trustees with advisory,
administrative and management services. Notwithstanding any contrary provisions
of this Declaration, the Trustees may authorize any adviser, administrator or
manager (subject to such instructions as the Trustees may adopt) to effect
purchases, sales, loans or exchanges of portfolio securities of any Series of
the Trust on behalf of the Trustees, or may authorize any officer, employee or
Trustee to effect such purchases, sales, loans or exchanges pursuant to
recommendations of any such adviser, administrator or manager (and all without
further action by the Trustees). Any purchases, sales, loans and exchanges shall
be deemed to have been authorized by all of the Trustees.
4.2. Distribution Arrangements
The Trustees may enter into contracts providing for the sale of the Shares of
the Trust or any Series of the Trust to net the Trust not less than the net
asset value per share. The Trust may either agree to sell the Shares to the
other party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the By-Laws. The contract may also provide
for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
4.3 Parties to Contract
Any contract of the character described in Section 4.1 and 4.2 of this Article
IV or in Article VII may be entered into with any corporation, firm, trust or
association, although one or more of the Trustees or officers of the Trust may
be an officer, director, Trustee, shareholder, or member of such other party to
the contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the ByLaws. The same person (including a firm,
corporation, trust, or associations) may be the other party to contracts entered
into pursuant to Sections 4.1 and 4.2 above or Article VII, and any individual
may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this Section 4.3.
4.4. Provisions for Amendments
Any contract entered into pursuant to Section 4.1 and 4.2 of this Article IV
shall be consistent with and subject to the requirements of Section 15 of the
1940 Act with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal thereof, and no
amendment to any contract entered into pursuant to Section 4.1 shall be
effective unless assented to by a Majority Shareholder Vote of the Applicable
Series.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
5.1. No Personal Liability of Shareholders, Trustees, etc
No Shareholder shall be subject to any personal liability to any Person in
connection with Trust Property or the acts, obligations or affairs of the Trust.
No Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability to any Person, other than the Trust or its Shareholders, in
connection with Trust Property or the affairs of the Trust or any Series
thereof, save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard of a duty to such Person; and all such Persons
shall look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust or any Series thereof. If
any Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability, he shall
not on account thereof be held to any personal liability. The Trust shall
indemnify and hold each Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by reason of his being
or having been a Shareholder, and shall reimburse such Shareholder for all legal
and other expenses reasonably incurred by him. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
5.2. Non-Liability of Trustees, and Others
No Trustee, officer, employee or agent of the Trust shall be liable to the
Trust, any series, its Shareholders, or to any Shareholder, Trustee, officer,
employee, or agent for any action or failure to act (including the failure to
compel in any way any former or acting Trustee to redress any breach of trust),
except upon a showing of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties.
5.3. Indemnification
(a) Every person who is or was a Trustee, officer or employee of this Trust
or a director, officer or employee of any corporation which he served at the
request of this Trust (and his firm, executors and administrators) shall have a
right to be indemnified by this Trust against all liability and reasonable
expenses incurred by him in connection with or resulting from any claim, action,
suit or proceeding in which he may become involved as a party or otherwise by
reason of his being or having been a Trustee, officer or employee of this Trust
or a director, officer or employee of such corporation, provided (1) said claim,
action, suit or proceeding shall be prosecuted to a final determination and he
shall be vindicated on the merits, or (2) in the absence of such final
determination vindicating him on the merits, the Board shall determine that he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful; said determination to be made (i) by the Board, by a majority vote of
a quorum consisting of disinterested Trustees; or (ii) if such quorum is not
obtainable or if a quorum of disinterested Trustees so directs, by independent
legal counsel in a written opinion, or (iii) by the Shareholders.
(b) For purposes of the preceding subsection: (1) "liability and reasonable
expense" shall include, but not be limited to, reasonable counsel fees and
disbursements, amounts of any judgment, fine or penalty, and reasonable amounts
paid in settlement; (2) "claim, action, suit or proceeding" shall include every
such claim, action, suit or proceeding, whether civil or criminal, derivative or
otherwise, administrative, judicial or investigative, any appeal relating
thereto, and shall include any reasonable apprehension or threat of such a
claim, action, suit or proceeding; (3) a settlement, plea of nolo contendre,
consent judgment, adverse civil judgment, or conviction shall not of itself
create a presumption that the conduct of the person seeking indemnification did
not meet the standard of conduct set forth in subsection (2) hereof.
(c) Notwithstanding the foregoing, the following additional limitations
shall apply with respect to any action by or in the right of the Trust: (1) no
indemnification shall be made in respect of any claim, issue or matter as to
which the person seeking indemnification shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Trust unless
the court which made such a finding, or any other court of equity in the county
where the Trust has its principal office determines that despite the
adjudication of liability, such person is fairly and reasonably entitled to
indemnity for some or all of such expenses; and (2) indemnification shall extend
only to reasonable expenses, including reasonable counsel's fees and
disbursements, and shall not include judgments, fines and amounts paid in
settlement.
(d) The right of indemnification shall extend to any person otherwise
entitled to it under this Article whether or not that person continues to be a
Trustee, officer or employee of this Trust or a director, officer or employee of
such corporation at the time such liability or expense shall be incurred. The
right of indemnification shall extend to the legal representative and heirs of
any person otherwise entitled to indemnification. If a person meets the
requirements of this Article with respect to some matters in a claim, action,
suit or proceeding, but not with respect to others, he shall be entitled to
indemnification as to the former. Expenses incurred in defending an action, suit
or proceeding may be paid by the Trust in advance of the final disposition of
such action, suit or proceeding as authorized by the Board in the specific case:
(1) upon receipt of an undertaking for which security has been provided by or on
behalf of the Trustee, director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Trust as authorized in this Article, or (2) if the Trust is at the time
of such advance insured against losses arising by reason of the advance.
(e) This Article shall not exclude any other rights of indemnification or
other rights to which any Trustee, officer, or employee may be entitled to by
contract, vote of the Shareholders or as a matter of law. If any clause,
provision or application of this Section 5.3 shall be determined to be invalid,
the other clauses, provisions or applications of this section shall not be
affected, but shall remain in full force and effect.
(f) The Trust shall have the power to purchase and maintain insurance on
behalf of any person who is or was a Trustee, officer, employee or agent of the
Trust, or is or was serving at the request of the Trust as a director, officer,
employee or agent of a corporation, against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his
status as such, whether or not the Trust would have the power to indemnify him
or her against such liability under the provisions of this Article.
5.4. No Bond Required of Trustees
No Trustee shall be obligated to give any bon or other security for the
performance of any of his or her duties.
5.5. No Duty of Investigation; Notice in Trust Instruments
No purchaser, lender, transfer agent or other person dealing with the Trustees
or with any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent regarding the application of
money or property paid, loaned, or delivered to or on the order of the Trustees
or of said officer, employee or agent. Every obligation, contract, undertaking,
instrument, certificate, Share, or security of the Trust or any Series, and
every other act in connection with the Trust or any Series shall be conclusively
taken to have been executed or done only by persons acting in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, undertaking,
instrument, or security of the Trust or any Series made or issued by the
Trustees or by any officers, employees or agents of the Trust, in their capacity
as such, shall contain an appropriate recital to the effect that the
Shareholders, Trustees, officers, employees and agents of the Trust shall
not personally be bound by or liable thereunder, but the omission of
such recital shall not operate to impose personal liability on any of the
Trustees, Shareholders, officers, employees or agents of the Trust. The Trustees
may maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
5.6. Reliance on Experts
Each Trustee and officer or employee of the Trust shall, in the performance of
his or her duties, be fully and completely justified and protected with regard
to any act or any failure to act resulting from reliance in good faith upon the
books of account or other records of the Trust, upon an opinion of counsel, or
upon reports made to the Trust by any of its officers or employees or by any
adviser, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
6.1. Beneficial Interest
The beneficial interest in the Trust shall at all times be divided into
transferable Shares, without par value, each of which shall represent an equal
proportionate interest in the Trust with each other Share outstanding, none
having priority or preference over another. The number of Shares which may be
issued is unlimited. Contributions to the Trust may be accepted for, and Shares
shall be redeemed as, whole Shares plus any fraction of a Share. All Shares
issued hereunder including, without limitation, Shares issued in connection with
a dividend in Shares or a split of Shares, shall be fully paid and
nonassessable.
6.2. Series Designation
The Trustees, in their discretion from time to time, may authorize the division
of Shares into two or more Series, each Series relating to a separate portfolio
of investments. The different Series shall be established and designated, and
the variations in the relative rights and preferences as between the different
Series shall be fixed and determined by the Trustees; provided, that there may
be variations between different Series as to purchase price, determination of
net asset value, the price, terms and manner of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, and conditions
under which the several Series shall have separate voting rights. All references
to Shares in this Declaration shall be deemed to be shares of any or all Series
as the context may require.
If the Trustees shall divide the Shares into two or more Series, the following
provisions shall be applicable:
(a) The number of Shares of each Series that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series into one or more Series
that may be established and designated from time to time. The Trustees may hold
as treasury Shares (of the same or some other Series), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series required by the Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust Property of
each Series that may be established shall be governed by Section 3.2 of this
Declaration.
(c) All consideration received by the Trust for the issue or sale of Shares
of a particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series, the Trustees
shall allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(e) The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth the establishment and designation of such Series. Such instrument
shall also set forth any rights and preferences of such Series which are in
addition to the rights and preferences of Shares set forth in this Declaration.
At any time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that Series and the establishment
and designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
6.3. Rights of Shareholders
The ownership of the Trust Property and the right to conduct any business
described in this declaration are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares.
The Shares shall not entitle the holder to preference, preemptive, appraisal or
conversion rights (except for rights of appraisal specified in Section 11.4).
6.4. Trust Only
It is the intention of the Trustees to create only the relationship of Trustee
and beneficiary between the Trustees and each Shareholder. It is not the
intention of the Trustees to create a general partnership, limited partnership,
joint stock association, corporation, bailment or any form of legal relationship
other than a trust.
6.5. Issuance of Shares
The Trustees, in their discretion, may from time to time without vote of the
Shareholders issue Shares in addition to the then issued and outstanding Shares
and Shares held in the treasury, to such party or parties and for such amount
not less than par value and type of consideration, including cash or property,
at such time or times and on such terms as the Trustees may deem best, and may
in such manner acquire other assets (including the acquisition of assets subject
to, and in connection with the assumption of, liabilities) and businesses. In
connection with any issuance of Shares, the Trustees may issue fractional
Shares. The Trustees may from time to time divide or combine the Shares of any
Series into a greater or lesser number without thereby changing the
proportionate beneficial interests in such Series of the Trust. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or multiples thereof.
6.6. Reqister of Shares
A register shall be kept at the principal office of the Trust which shall
contain the names and addresses of the Shareholders, the number of Shares (with
respect to each Series that may have been established) held by them and a record
of all transfers thereof. Separate registers shall be established and maintained
for each Series of the Trust. Each such register shall be conclusive as to who
are the holders of the Shares of the applicable Series and who shall be entitled
to exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or distribution, nor to have notice
given to such Shareholder as herein provided, until such Shareholder has given
his address to an officer or agent of the Trustees as shall keep the register
for entry thereon. Certificates will not be issued for the Shares.
6.7. Transfer of Shares
Shares shall be transferable on the records of the Trust only by the record
holder thereof or by the record holder's agent thereto duly authorized in
writing, upon delivery to the Trustees of a duly executed instrument of
Transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matters as the Trustees may reasonably require.
Upon such delivery the transfer shall be recorded on the applicable register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereof and neither the Trustees
nor registrar nor any officer, employee or agent of the Trust shall be affected
by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence to the Trustees, but until
such record is made, the Shareholder of record shall be deemed to be the holder
of such Shares for all purposes and neither the Trustees nor registrar nor any
officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law.
ARTICLE VII
CUSTODIANS
7.1. Appointment and Duties
The Trustees shall at all times employ a custodian or custodians who shall meet
the qualifications for custodians for portfolio securities of investment
companies contained in the 1940 Act. As custodians with respect to each Series
of the Trust, separate custodians may be employed for the different Series of
the Trust. Any custodian, acting with respect to one or more Series, shall have
authority as agent of the Trust or the Series with respect to which it is
acting, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust or the Series and
deliver the same upon written order;
(2) to receive any moneys due to the Trust or the Series and deposit
the same in its own banking department (if a bank) or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust or the Series and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income
of the Trust or the Series;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of the Series
for which the Custodian is acting, the custodian shall deliver and pay over all
property.of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one or more
sub-custodians to perform such of the acts and services of the custodian, and
upon such terms and conditions, as may be agreed upon between the custodian and
such sub-custodian and approved by the Trustees, provided that in every case
such sub-custodian shall meet the qualifications for custodians contained in the
1940 Act.
7.2. Central Certificate System
Subject to such rules, regulations and orders as the Commission may adopt, the
Trustees may direct the custodian to deposit all or any part of the securities
owned by the Trust or the Series in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
custodian at the direction of the Trustees.
ARTICLE VIII
REDEMPTION
8.1. Redemptions
All outstanding Shares of any Series of the Trust may be redeemed at the option
of the Shareholders thereof, upon and subject to the terms and conditions
provided in this Article VIII. The Trust shall, upon application of any
Shareholder or pursuant to authorization from any Shareholder of a particular
Series, redeem or repurchase from such Shareholder outstanding Shares of such
Series for an amount per share determined by the application of a formula
adopted for such purpose by the Trustees with respect to such Series (which
formula shall be consistent with the 1940 Act); provided that (a) such amount
per share shall not exceed the cash equivalent of the proportionate interest of
each share in the assets of the Series of the Trust at the time of the purchase
or redemption and (b) if so authorized by the Trustees, the Trust, to the extent
permitted under the 1940 Act, may charge fees for effecting such redemption, at
such rates as the Trustees may establish, to the extent permitted under the 1940
Act, and, from time to time, pursuant to such Act, suspend such right
of-redemption. The procedures for effecting redemption shall be as set forth in
the Prospectus with respect to the applicable Series from time to time.
8.2 Involuntary Redemption of Shares; Disclosure of Holding
The Trustees shall have the power to require the redemption of Shares of any
Shareholder of any Series if at any time the account does not have a minimum
dollar value, determined by the Trustees in their sole discretion, at a
redemption price determined in accordance with Section 8.1 or to impose monthly
service charges on such accounts. If the Trustees shall in good faith be of the
opinion that direct or indirect ownership of Shares or other securities of the
Trust has or may become concentrated in any person to an extent which would
disqualify the Trust as a regulated investment company under the Internal
Revenue Code, then the Trustees shall have the power by lot or other means
deemed equitable by them (i) to call for redemption a number, or principal
amount, of Shares or other securities of the Trust sufficient, in the opinion of
the Trustees, to maintain or bring the direct or indirect ownership of Shares or
other securities of the Trust into conformity with the requirements for such
qualification and (ii) to refuse to transfer or issue Shares or other securities
of the Trust to any Person whose acquisition of the Shares or other securities
of the Trust in question would, in the opinion of the Trustees, result in such
disqualification. The redemption shall be effected at a redemption price
determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall upon demand,
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code or
with the requirements of any other taxing authority.
ARTICLE IX
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
9.1. Net Asset Value
The net asset value of each outstanding Share of each Series of the Trust shall
be determined at such time or times on such days as the Trustees may determine,
in accordance with the 1940 Act, with respect to each Series. The method of
determination of net asset value shall be determined by the Trustees and shall
be as set forth in the prospectus with respect to the applicable Series. The
power and duty to make the daily calculations for any Series may be delegated by
the Trustees to the adviser, administrator, manager, custodian, transfer agent
or such other persons as the Trustees may determine. The Trustees may suspend
the daily determination of net asset value to the extent permitted by the 1940
Act.
9.2. Distributions to Shareholders
The Trustees shall from time to time distribute ratably among the Shareholders
of any Series such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets with respect to such Series held by the Trustees as
they may deem proper. Such distribution may be made in cash or property
(including without limitation any type of obligations of the Trust or any assets
thereof), and the Trustees may distribute ratably among the Shareholders of any
Series additional Shares of such Series in such manner, at such times, and on
such terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution or among the
Shareholders of record at such later date as the Trustees shall determine. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or to meet obligations of
the Trust, or as they may deem desirable to use in the conduct of its affairs or
to retain for future requirements or extensions of the business. The Trustees
may adopt and offer to Shareholders of any Series such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees shall deem
appropriate for such Series.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof under generally accepted
accounting principles, the above provisions shall be interpreted to give the
Trustees the power to distribute for any fiscal year as ordinary dividends and
as capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.3. Power to Modify Foregoing Procedures
Notwithstanding any of the foregoing provisions of this Article IX, the Trustees
may prescribe such other bases and times for determining the per share net asset
value of the Shares or net income of any Series, or the declaration and payment
of dividends and distributions as they may deem necessary to enable the Trust to
comply with any provision of the 1940 Act, or the requirements of any securities
association registered under the Securities Exchange Act of 1934, or any order
of exemption issued by the Commission, all as in effect now or hereafter amended
or modified.
ARTICLE X
SHAREHOLDERS
10.1. Meetings of Shareholders
(a) Meetings. Meetings of the Shareholders shall be held, at such place
within or without the Commonwealth of Massachusetts on such day and at such time
as the Trustees shall designate. Such Meetings of the Shareholders may be called
by the Trustees or the President of the Trust and shall be called by the
Trustees upon written request of Shareholders of any Series owning in the
aggregate at least one-fourth of the outstanding Shares of such Series entitled
to vote.
(b) Quorum. At any Shareholder meeting, unless otherwise provided by law,
this Declaration, or the by-laws, the presence in person or by proxy of a
majority of the votes entitled to be cast constitutes a quorum, and a majority
of the votes so present is sufficient to approve any matter properly before the
meeting.
10.2. Voting Powers
The Shareholders shall have power to vote (i) for the election of Trustees as
provided in Section 2.2; (ii) for the removal of Trustees as provided in Section
2.3(d); (iii) with respect to any investment adviser or sub-investment adviser
as provided in section 4.1; (iv) with respect to any termination or
reorganization of the Trust as provided in Sections 11.2, 11.3, and 11.4; (v)
with respect to the amendment of this Declaration of Trust as provided in
Section 11.3; (vi) to the same extent as the shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Trust or the Shareholders; and (vii) with respect to such additional matters
relating to the Trust as may be required by law, by this Declaration of Trust,
or the By-Laws of the Trust or any registration of the Trust or its shares with
the Securities and Exchange Commission or any State, or as the Trustees may
consider desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. There shall be no cumulative voting
in the election of Trustees. Shares may be voted in person or by proxy. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required or permitted by law, this Declaration of Trust or the
BY-Laws of the Trust to be taken by Shareholders. Any matter affecting a
particular Series, including without limitation matters affecting the investment
advisory arrangements or investment policies or restrictions of a Series, shall
not be deemed to have been effectively acted upon unless approved by the
required vote of the Shareholders of such Series. Notwithstanding the foregoing,
to the extent permitted by the 1940 Act, each Series shall not be required to
vote separately on the selection of independent public accountants, the election
of Trustees or any submission with respect to a contract with a principal
underwriter or distributor.
10.3. Notice of Meetings
Notice of each meeting of the Shareholders, stating the time, place and purposes
of the meeting, shall be given by the Secretary by mail to each Shareholder at
his or her registered address, mailed at least 10 days and not more than 60 days
before the meeting. Only the business stated in the notice of the meeting shall
be considered at such meeting. Any adjourned meeting may be held as adjourned
without further notice.
10.4. Record Date for Meetings
For the purpose of determining the Shareholders who are entitled to notice of
and to vote at any meeting, or to participate in any distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date not
more than 60 days prior to the date of any meeting of Shareholders or other
action as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments, which
shall be governed by Section 9.2.
10.5. Proxies
At any meeting of Shareholders, any holder of Shares entitled to vote may vote
by proxy, provided that no proxy shall be voted at any meeting unless it shall
have been placed on file with the Secretary, or with such other officer or agent
of the Trust as the Secretary may direct, for verification prior to the time at
which such vote shall be taken. Pursuant to a resolution of a majority of the
Trustees, proxies may be solicited in the name of one or more Trustees or one or
more of the officers of the Trust. Only Shareholders of record shall be entitled
to vote. Each full Share shall be entitled to one vote and fractional Shares
shall be entitled to a vote of such fraction. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such Share is a minor or a person of unsound mind, and subject to
guardianship or to the legal control of any other person as regards the charge
or management of such Share, he may vote by his or her guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy. Unless a proxy provides otherwise, it is not valid more than 11 months
after its date.
10.6. Reports
The Trustees shall cause to be prepared with respect to each Series at least
annually a report of operations containing a balance sheet and statement of
income and undistributed income of the applicable Series prepared in conformity
with generally accepted accounting principles and an opinion of an independent
public accountant on such financial statements of the applicable Series. Copies
of such reports shall be mailed to all Shareholders of record within the time
required by the 1940 Act. The Trustees shall, in addition, furnish to the
Shareholders at least semiannually interim reports containing an unaudited
balance sheet of the Series as of the end of such period and an unaudited
statement of income and surplus for the period from the beginning of the current
fiscal year to the end of such period.
10.7. Inspection of Records
The records of the Trust shall be open to inspection By Shareholders to the same
extent as is permitted shareholders of a Massachusetts business corporation.
10.8. Shareholder Action by Written Consent
Any action which may be taken by Shareholders may be taken without a meeting if
a majority of Shareholders entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE XI
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
11.1. Duration
Subject to possible termination in accordance with the provisions of Section
11.2 hereof, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Address Date of Birth
Tyler V. Hill 85-Ledyard Rd. 2/25/75
West Hartford, CT 06117
Rebecca D. Ellis 130 Country View Drive 5/19/77
South Windsor, CT 06074
</TABLE>
11.2. Termination
(a) The Trust may be terminated by the affirmative vote of the holders of
not less than two-thirds of the Shares of each Series of the Trust at any
meeting of Shareholders or by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not less
than two-thirds of such Shares. Any Series may be terminated by vote or written
consent of holders of not less than two-thirds of the shares of such Series or
as provided upon the establishment of the Series. Upon the termination of the
Trust,
(i) The Trust or such Series shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or such Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or such Series shall have been
wound up, including the power to fulfill or discharge the contracts of the Trust
or such Series, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property to one or
more persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind, discharge
or pay its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange, transfer
or other disposition of all or substantially all the Trust Property shall
require approval of the principal terms of the transaction and the nature
and amount of the consideration by vote or consent of the holders of a
majority of the Shares entitled to vote.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of any Series, in cash or in kind or
partly in each, among the Shareholders of any Series, according to their
respective rights.
(b) After termination of the Trust or any Series and distribution to the
Shareholders, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination. Upon termination of any Series of the Trust, the Trustees shall be
discharged from all further liabilities and duties with respect to such Series,
and the rights and interests of all Shareholders shall cease.
11.3. Amendment Procedure
(a) This Declaration may be amended by the affirmative vote of the holders
of not less than a majority of the Shares at any meeting of Shareholders or by
an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of such
Shares. The Shareholders of each Series shall have the right to vote separately
on amendments to this Declaration to the extent provided by Section 10.2. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders as provided in Section 6.2(e) or if they deem it necessary to
conform this Declaration to the requirements of applicable federal laws or
regulations, or the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be liable for failing
so to do.
(b) No amendment may be made, under Section 11.3 (a) above, which would
change any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of each Series. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust, or to permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid, or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
Notwithstanding any other provision hereof, until the first meeting of the
shareholder or shareholders of the Trust, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the Trustees or
by an instrument signed by a majority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets
The Trust may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any meeting of
Shareholders called for that purpose, by the affirmative vote of the holders of
not less than two-thirds of the Shares of each Series, or by an instrument in
writing without a meeting, consented to by the holders of not less than
two-thirds of the Shares of each Series. Any Series may so merge, consolidate or
effect a sale or exchange of assets by the vote or written consent of not less
than two-thirds of the Shares of such Series. Any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposes to have been
accomplished under and pursuant to the statutes of the Commonwealth of
Massachusetts. In respect of any such merger, consolidation, sale or exchange of
assets, any Shareholder shall be entitled to rights of appraisal of his Shares
to the same extent as a shareholder of a Massachusetts business corporation in
respect of a merger, consolidation, sale or exchange of assets of a
Massachusetts business corporation, and such rights shall be his exclusive
remedy in respect of his or her dissent from any such action.
ARTICLE XII
MISCELLANEOUS
12.1. Notices
Whenever under applicable law, this Declaration or the By-Laws, notice is
required to be given to any Trustee, committee member, officer or Shareholder,
such notice may be given, in the case of Shareholders, by mail by depositing the
same in a United States post office or letter box, in a postpaid, sealed
wrapper, addressed to such Shareholder, at such address as appears on the books
of the Trust, and, in the case of Trustees, committee members and officers, by
telephone, or by mail or by telegram to the last business or home address known
to the Secretary. Such notice shall be deemed given when mailed, telegraphed or
telephoned.
12.2. Filing
This Declaration and any amendment hereto shall be filed in the office of the
Secretary of the Commonwealth of Massachusetts and in such other places as may
be required under the laws of Massachusetts and may also be filed or recorded in
such other places as the Trustees deem appropriate. Each amendment so filed
shall be accompanied by a certificate signed and acknowledged by a Trustee
stating that such action was duly taken in a manner provided herein, and unless
such amendment or such certificate sets forth some later time for the
effectiveness of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, containing the original Declaration and all
amendments made, may be executed by a majority of the Trustees and shall, upon
filing with the State Secretary of the Commonwealth of Massachusetts be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
12.3. Resident Agent
The Trust shall maintain a resident agent in the Commonwealth of Massachusetts,
which agent shall initially be CT Corporation System, 2 Oliver Street, Boston,
Mass. 02109. The Trustees may designate a successor resident agent, provided,
however, that such appointment shall not become effective until written notice
thereof is delivered to the office of the Secretary of the Commonwealth.
12.4. Governing Law
This Declaration is executed by the Trustees and delivered in the Commonwealth
of Massachusetts. The rights of all parties and the validity and construction of
every provision shall be subject to and construed according to the laws of said
State, and reference shall be specifically made to the business corporation law
of the Commonwealth of Massachusetts as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
12.5. Reliance by Third Parties
Any certificate executed by an individual who, according to the records of the
Trust, or of any recording office in which this Declaration may be recorded,
appears to be a Trustee hereunder, certifying to: (a) the number or identity of
Trustees or Shareholders, (b) the name of the Trust or any Series thereof, (c)
the establishment of any Series, (d) the due authorization of the execution of
any instrument or writing, (e) the form of any vote passed at a meeting of
Trustees or Shareholders, (f) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (g) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (h) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust or any Series, shall be conclusive evidence as to the matters so certified
in favor of any person dealing with the Trustees and their successors.
12.6. Provisions in Conflict With Law or Regulations
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction, and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
12.7. Trust Name
The Trust is adopting its name by permission of Aetna Life and Casualty Company,
and the Trust's right to use the name "Aetna" is subject to the right of Aetna
Life and Casualty Company or its assigns to elect that the Trust stop using the
name "Aetna" in any literature or reference whatsoever, in the event that the
securities portfolio of any Series of the Trust shall cease to be managed by
Aetna Life and Casualty Company or some other corporation controlled by, or
affiliated with it. The use by this Trust of the name "Aetna" shall in no way
prevent Aetna Life and Casualty Company, or any corporation or other entity
controlled by or affiliated with said company or its respective successors or
assigns, from using or permitting the use of the name "Aetna" for, by or in
connection with any other entity or business, whether or not the same directly
or indirectly competes or conflicts with this Trust or its business in any
manner.
IN WITNESS WHEREOF, the undersigned have executed this instrument the day and
year first above written.
- --------------------------------- ------------------------------
Donald G. Conrad James E. Mulvihill
- --------------------------------- ------------------------------
David L. Grove Corine T. Norgaard
--------------------------
Dean E. Wolcott
State of Connecticut )
ss
County of Hartford )
I hereby certify that on March 9, 1987 before me, the subscriber, a Notary
Public of the State of Connecticut, in and for the County of Hartford,
appeared Donald G. Conrad, James E. Mulvihill, David L. Grove, Corine T.
Norgaard and Dean E. Wolcott who acknowledged the foregoing Declaration of
Trust to be their voluntary act and deed.
----------------------------
Notary Public
TRUSTEES
<TABLE>
<CAPTION>
<S> <C>
NAME ADDRESS
Donald G. Conrad 151 Famington Avenue
Hartford, Connecticut 06156
David L. Grove 5 The Knoll
Armonk, New York
James E. Mulvihill Vice President for Health Affairs
University of Conn. Health Center
Farmington, Connecticut 06032
Corine T. Norgaard School of Business Administration
University of Connecticut
Storrs, Connecticut 06268
Dean E. Wolcott 151 Famington Avenue
Hartford, Connecticut 06156
</TABLE>
AMENDMENT TO DECLARATION OF TRUST OF
AETNA GET FUND
Designating a New Series of Beneficial Interests
The undersigned, being a majority of the duly elected and qualified Trustees of
Aetna GET Fund, a Massachusetts business trust (the "Trust"), acting pursuant to
Sections 1.1, 6.2 and 11.3 of the Declaration of Trust dated March 9, 1987, as
amended (the "Declaration of Trust"), hereby divide the shares of beneficial
interest of the Trust into and establish a separate series (the "Fund") distinct
from shares of the Trust previously issued but no longer outstanding, with the
Fund to have the following special and relative rights:
1. The Fund shall be designated as follows:
Series C
2. The Fund shall be authorized to hold cash and invest in securities and
instruments and use investment techniques as described in the Trust's
registration statement under the Securities Act of 1933, as amended from time to
time. Each share of beneficial interest of the Fund ("share") shall be
redeemable as provided in the Declaration of Trust, shall be entitled to one
vote (or fraction thereof in respect of a fractional share) on matters on which
shares of the Fund shall be entitled to vote and shall represent a pro rata
beneficial interest in the assets allocated to the Fund. The proceeds of sales
of shares of the Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to the Fund, unless
otherwise required by law. Each share of the Fund shall be entitled to receive
its pro rata share of net assets of the Fund upon its liquidation.
3. Shareholders of the Fund shall vote separately as a class on any matter
to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2 under
the Investment Company Act of 1940, as amended, as from time to time in effect,
or any successor rule and in the Declaration of Trust.
4. The Trustees (including any successor Trustee) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund provided that such change shall not
adversely affect the rights of shareholders of a Fund.
The foregoing shall be effective upon execution.
- -----------------------------------------------------
Shaun P. Mathews, as Trustee and not individually
- -----------------------------------------------------
Morton Ehrlich, as Trustee and not individually
- -----------------------------------------------------
Maria T. Fighetti, as Trustee and not individually
- -----------------------------------------------------
David L. Grove, as Trustee and not individually
- -----------------------------------------------------
Daniel P. Kearney, as Trustee and not individually
- -----------------------------------------------------
Timothy A. Holt, as Trustee and not individually
- -----------------------------------------------------
Sidney Koch, as Trustee and not individually
- -----------------------------------------------------
Corine T. Norgaard, as Trustee and not individually
- -----------------------------------------------------
Richard G. Scheide, as Trustee and not individually
Dated: June __, 1996
AETNA GET FUND
Amended and Restated By-Laws
ARTICLE I
NAME, SERIES
Section 1. Name of Trust. The name of the Trust shall be Aetna GET Fund
(the "Trust").
Section 2. Series of the Trust. The Trustees and officers of this Trust
shall take such action as they may deem necessary or appropriate from time to
time to register Aetna GET Fund as an investment company under the Investment
Company Act of 1940 and to register shares of Series C and any subsequent series
for sale under applicable securities laws, and to keep such registrations in
effect as long as required by the terms of the Series.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the trust in the Commonwealth of Massachusetts shall be in Boston or
such other place as the officers of the Trust may determine from time to time.
The principal office outside the Commonwealth of Massachusetts shall be in
Hartford, Connecticut.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE III
BOARD OF TRUSTEES
Section 1. Powers. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Meetings. The Trustees may in their discretion provide for
annual or regular meetings of the Board of Trustees (the "Board"). Special
meetings of the Board shall be held whenever called by the President or any
Trustee. The Board may hold its meetings at such place or places as it may from
time to time determine.
Section 3. Notice. The Secretary or Assistant Secretary shall give, at
least two days before the meeting, notice of each meeting of the Board, whether
annual, regular or special, to each member of the Board by mail, telegram or
telephone to his last known address. It should not be necessary to state the
purpose or business to be transacted in the notice of any annual or regular
meeting. The notice of a Special Meeting shall state the purpose or purposes for
which it is called. Personal attendance at any meeting by a Trustee other than
to protest the validity of said meeting shall constitute a waiver of the
foregoing requirement of notice.
Section 4. Quorum. A majority of the Trustees at the time in office shall
constitute a quorum, except as the Investment Company Act of 1940 shall require
a larger quorum for specific purposes. A majority of the Trustees present and
constituting a quorum shall decide matters before the Board, unless a greater
vote is required by law, these By-Laws, or the Declaration of Trust.
Section 5. Informal Action by Trustees. Any action required or permitted to
be taken at any annual, regular or special meeting of the Board may be taken at
a telephonic meeting or without a meeting, if a written consent to such action
is signed by all members of the Board and such written consent is filed with the
minutes of proceedings of the Board.
Section 6. Compensation of Trustees. The Trustees may receive a stated
salary for their services as Trustees, and by Resolution of the Board a fixed
fee and expenses of attendance may be allowed for attendance at each Meeting.
Nothing herein contained shall be construed to preclude any Trustee from serving
the Trust in any other capacity, as an officer, agent or otherwise, and
receiving compensation therefor.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive Committee. The Board may elect from its members an
Executive Committee of not less than three which may, when the Board is not in
session, exercise all the powers of the Board except the power to declare
dividends, to issue stock or to recommend to shareholders any action requiring
shareholder approval. The Executive Committee may make rules for the holding and
conduct of its meetings and keeping the records thereof, and shall report its
action to the Board.
Section 2. Audit Committee. The Board may elect from its members an Audit
Committee of not less than three non-officer Trustees. The Committee shall be
responsible for reviewing the audit procedures of the Trust, the qualifications
of independent certified public accountants performing the audit functions, the
annual reports of such accountants and shall perform such other functions as are
consistent with the general purposes of an audit committee.
Section 3. Other Committees. The Board may elect from its members such
other committees from time to time as it may desire. The number composing such
committees and the powers conferred upon them shall be determined by the Board
at its own discretion.
Section 4. Consents. Any action required or permitted to be taken at any
meeting of the Executive Committee or any other duly appointed Committee may be
taken without a meeting if written consent to such action is signed by all
members.
ARTICLE V
OFFICERS
Section 1. Selection. The Trust shall have a President (who shall also be a
Trustee), one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as the Board of Trustees may elect. All officers shall be elected
annually by the Board, and unless the Board otherwise provides, shall
serve until the next annual meeting of the Board following their election. The
Board may elect or appoint additional officers or agents at any regular or
special meeting of the Board. The Trustees may delegate to any officer or
committee the power to appoint any subordinate officers or agents. The Secretary
and Treasurer may be the same person. A Vice President and the Treasurer or a
Vice President and the Secretary may be the same person, but the offices of Vice
President, Secretary and Treasurer shall not be held by the same person. The
President shall hold no other office. Except as above provided, the same person
may hold more than one office.
Section 2. Removal. Any officer elected by the Board may be removed with or
without cause at any time upon a vote of the majority of the entire Board. Any
other employee of the Trust may be removed or dismissed at any time with or
without cause by the President. Any vacancy in any of the offices may be filled
for the unexpired portion of the term by the Board at any regular or special
meeting of the Board.
Section 3. The President. The President shall be the chief executive
officer of the Trust; shall have general and active management of the business,
affairs and property of the Trust; shall see that all orders and resolutions of
the Board are carried into effect; and shall preside at meetings of shareholders
and of the Board.
Section 4. The Vice President. The Vice President (or if more than one, the
Senior Vice President) shall have such powers and perform such duties as may be
assigned to him by the Board, the Executive Committee or the President. In the
absence or disability of the President, the Vice President shall perform all
duties and may exercise any of the powers of the President, subject to the
control of the Board.
Section 5. The Secretary. The Secretary shall keep or cause to be kept
accurate minutes of all meetings of the shareholders and the Board; shall see
that all Notices are duly given in accordance with these By-Laws and as required
by law; and shall perform all duties commonly incident to the office and such
other duties and have such other powers as the Board, the Executive Committee or
the President shall from time to time designate.
Section 6. The Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust. Subject to the order of the Board and in
accordance with any arrangements approved by the Board, the Treasurer shall have
the custody of the funds and securities of the Trust and shall have and exercise
all powers and duties commonly incident to the office and as provided by law and
such other duties as may be from time to time assigned to him by the Board, the
Executive Committee or the President. The Treasurer, whenever required by the
Board, shall make and render a statement of the accounts of the Trust and such
other statements as may be required.
Section 7. Assistant Vice President. The Assistant Vice President or Vice
Presidents of the Trust shall have such authority and perform such duties as may
be assigned to them by the Board, the Executive Committee or the President.
Section 8. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretary or Secretaries and the Assistant Treasurer or Treasurers shall perform
the duties of the Secretary and of the Treasurer respectively, in the absence of
those officers, and shall have such further powers and perform such other duties
as may be assigned to them, respectively, by the Board, the Executive Committee
or the President.
Section 9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a Trustee.
ARTICLE VI
CUSTODIAN
Section 1. Appointment. All securities and cash owned by the Trust or any
series thereof shall, as hereinafter provided, be held by or deposited with a
bank or trust company having (according to its last published report) not less
than five million dollars ($5,000,000) aggregate capital, surplus and undivided
profits (which bank or trust company is hereby designated as "Custodian"),
provided such a Custodian can be found ready and willing to act.
Section 2. Subcustodian. The Trustees may authorize the Custodian to employ
one or more Subcustodians from time to time to perform such of the acts and
services of the Custodian and upon such terms and conditions as may be agreed
upon between the Custodian and such sub-Custodian and approved by the Trustees,
provided that in every case such sub-Custodian shall be a bank or trust company
organized under the laws of the United States or one of the states thereof and
having capital, surplus and undivided profits of at least $5,000,000.
Section 3. Contract; Successor Custodian. The Trust shall enter into a
written contract with the Custodian regarding the powers, duties and
compensation of the Custodian with respect to the cash and securities of the
Trust held by the Custodian. Said contract and all amendments thereto shall be
approved by the Board of Trustees of the Trust. The following provisions shall
apply to the employment of a Custodian pursuant to this Article VI and to any
contract entered into with the Custodian so employed:
(a) The Trustees shall cause to be delivered to the Custodian all
securities owned by the Trust or to which it may become entitled, and shall
order the same to be delivered by the Custodian only upon completion of a sale,
exchange, transfer, pledge, or other disposition thereof, and upon receipt by
the Custodian of the consideration therefor or a certificate of deposit or a
receipt of an issuer or of its Transfer Agent, all as the Trustees may generally
or from time to time require or approve, or to a successor Custodian; and the
Trustees shall cause all funds owned by the Trust or to which it may become
entitled to be paid to the Custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the Trust,
including distributions to shareholders, or to a successor Custodian; provided,
however, that nothing herein shall prevent delivery of securities for
examination to the broker purchasing the same in accord with the "street
delivery" custom whereby such securities are delivered to such broker in
exchange for a delivery receipt exchanged on the same day for an uncertified
check of such broker to be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any
such Custodian, the Trust shall promptly appoint another bank or trust company
meeting the requirements of this Article VI as successor Custodian. The
agreement with the Custodian shall provide that the retiring Custodian shall,
upon receipt of notice of such appointment, deliver all Trust Property in its
possession to such successor, and that pending appointment of a successor
Custodian, or a vote of the Shareholders to function without a Custodian, the
Custodian shall not deliver any Trust property to the Trust, but may deliver all
or any part of the Trust property to a bank or trust company of its own
selection, having an aggregate capital, surplus and undivided profits (as shown
in its last published report) of at least $5,000,000; provided that arrangements
are made for the Trust property to be held under terms similar to those on which
they were held by the retiring Custodian.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Waivers of Notice. Whenever any notice whatever is required to
be given under the provisions of any statute of the Commonwealth of
Massachusetts, or under the provisions of the Declaration of Trust or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. A person's presence shall waive notice.
Section 2. Execution of Documents. Except as otherwise provided in these
By-Laws, all documents may be executed on behalf of the Trust by the President
or any Vice President or by any other officer or agent authorized to act in such
matters, whether by law, the Declaration of Trust, these By-Laws or any
authorization of the Board.
Section 3. Limitation Concerning Participating by Interested Persons in
Investment Decisions. In any case where an officer or Trustee of the Trust, or a
member of an advisory committee or portfolio committee of the Trust, is also an
officer or a director or Trustee of another corporation, and the purchase or
sale of shares issued by that other corporation is under consideration, such
individual or committee member will abstain from participating in any decision
made on behalf of the Trust to purchase or sell any securities issued by such
other corporation.
ARTICLE VIII
AMENDMENTS
Section 1. The Board shall have the power, at any annual, regular or
special meeting, if notice thereof be included in the notice of such meeting, to
alter, amend or repeal any By-Laws of the Trust and to make new By-Laws.
Section 2. The shareholders shall have the power, at any annual meeting or
at any special meeting if notice thereof be included in the notice of such
meeting, to alter, amend or repeal any By-Laws of the Trust or to make new
ByLaws.
FORM OF
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA LIFE INSURANCE AND ANNUITY COMPANY,
a Connecticut corporation (the "Adviser") and AETNA GET FUND, a Massachusetts
business trust, on behalf of its Series C (the "Fund"), as of the date set forth
below.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered with the Commission as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is in the business of acting as an investment adviser; and
WHEREAS, the Fund and the Adviser desire to enter into an agreement to provide
for investment advisory and management services for the Fund on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement and the policies and
control of the Fund's Board of Trustees (the "Board"), the Fund hereby appoints
the Adviser to serve as the investment adviser to the Fund, to provide the
investment advisory services set forth below in Section II. The Adviser agrees
that, except as required to carry out its duties under this Agreement or
otherwise expressly authorized, it is acting as an independent contractor and
not as an agent of the Fund and has no authority to act for or represent the
Fund in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the following:
A. supervise all aspects of the operations of the Fund;
B. select the securities to be purchased, sold or exchanged by the Fund
or otherwise represented in the Fund's investment portfolio, place trades for
all such securities and regularly report thereon to the Board;
C. formulate and implement continuing programs for the purchase and sale
of securities and regularly report thereon to the Board;
D. obtain and evaluate pertinent information about significant developments
and economic, statistical and financial data, domestic, foreign or otherwise,
whether affecting the economy generally, the Fund, securities held by or under
consideration for the Fund, or the issuers of those securities;
E. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's performance
of its duties hereunder;
F. obtain the services of, contract with, and provide instructions to
custodians and/or subcustodians of the Fund's securities, transfer agents,
dividend paying agents, pricing services and other service providers as are
necessary to carry out the terms of this Agreement;
G. 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
H. take any other actions which appear to the Adviser and the Board
necessary to carry into effect the purposes of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the Fund as follows:
1. Due Incorporation and Organization. The Adviser is duly
organized and is in good standing under the laws of the State of Connecticut
and is fully authorized to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser
with the Commission under the Advisers Act, and is registered or licensed as an
investment adviser under the laws of all jurisdictions in which its activities
require it to be so registered or licensed. The Adviser shall maintain such
registration or license in effect at all times during the term of this
Agreement.
3. Best Efforts. The Adviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations hereunder.
B. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly
formed as a business trust under the laws of the Commonwealth of Massachusetts
and it is authorized to enter into this Agreement and carry out its
obligations hereunder.
2. Registration. The Fund is registered as an investment company with
the Commission under the 1940 Act and shares of the Fund are registered for
offer and sale to the public under the Securities Act of 1933, as amended (the
"1933 Act") and all applicable state securities laws. Such registrations will be
kept in effect during the term of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
A. Appointment of Subadviser
Subject to the approval of the Board and the shareholders of the Fund, the
Adviser may enter into a Subadvisory Agreement to engage a subadviser (the
"Subadviser") to the Adviser with respect to the Fund.
B. Duties of Subadviser
Under a Subadvisory Agreement, the Subadviser may be delegated some or all
of the following duties of the Adviser:
1. select the securities to be purchased, sold or exchanged by the
Fund or otherwise represented in the Fund's investment portfolio, place trades
for all such securities and regularly report thereon to the Board;
2. formulate and implement continuing programs for the purchase and
sale of the securities of such issuers and regularly report thereon to the
Board;
3. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally, the Fund, securities held by
or under consideration for the Fund, or the issuers of those securities;
4. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's performance
of its duties hereunder;
5. give instructions to the custodian and/or sub-custodian of the Fund
appointed by the Board, as to deliveries of securities, transfers of currencies
and payments of cash for the Fund as required to carry out the investment
activities of the Fund, in relation to the matters contemplated by this
Agreement; and
6. provide such financial support, administrative services and other
duties as the Adviser deems necessary and appropriate.
C. Duties of the Adviser
In the event the Adviser delegates certain responsibilities hereunder to a
Subadviser, the Adviser shall, among other things:
1. monitor the investment program maintained by the Subadviser for the
Fund and the Subadviser's compliance program to ensure that the Fund's assets
are invested in compliance with the Subadvisory Agreement and the Fund's
investment objectives and policies as adopted by the Board and described in the
most current effective amendment of the registration statement for the Fund, as
filed with the Commission under the 1933 Act and the 1940 Act ("Registration
Statement");
2. review all data and financial reports prepared by the Subadviser
to assure that they are in compliance with applicable requirements and meet
the provisions of applicable laws and regulations;
3. establish and maintain regular communications with the Subadviser
to share information it obtains with the Subadviser concerning the effect of
developments and data on the investment program maintained by the Subadviser;
and
4. oversee all matters relating to the offer and sale of the Fund's
shares, the Fund's corporate governance, reports to the Board, contracts with
all third parties on behalf of the Fund for services to the Fund, reports to
regulatory authorities and compliance with all applicable rules and regulations
affecting the Fund's operations.
V. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Adviser, at its own expense, shall place all orders for the purchase
and sale of portfolio securities for the Fund with brokers or dealers selected
by the Adviser, which may include brokers or dealers affiliated with the
Adviser. The Adviser shall use its best efforts to seek to execute portfolio
transactions at prices that are advantageous to the Fund and at commission rates
that are reasonable in relation to the benefits received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to the Fund and/or the other accounts over which the Adviser or its
affiliates exercise investment discretion. The Adviser may also select brokers
or dealers to effect transactions for the Fund who provide payment for expenses
of the Fund. The Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services or expenses, a commission for executing a
portfolio transaction for the Fund that is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer and is paid in compliance with Section 28(e)
or other rules and regulations of the Commission. This determination may be
viewed in terms of either that particular transaction or the overall
responsibilities that the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. The Board shall
periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits received.
VI. CONTROL BY THE BOARD OF TRUSTEES
Any investment program undertaken by the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Adviser on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the Board.
VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
A. all applicable provisions of the 1940 Act, the Advisers Act and any
rules and regulations adopted thereafter;
B. all policies and procedures of the Fund as adopted by the Board and
as described in the Registration Statement;
C. the provisions of the Fund's Declaration of Trust, as amended;
D. the provisions of the Bylaws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Fund shall pay to the Adviser an annual fee, payable
monthly, equal to .75% of the average daily net assets of the Fund. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily at the rate of 1/365 of .75% of the daily net assets of the Fund.
If this Agreement becomes effective subsequent to the first day of a month or
terminates before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees set forth above. Subject to the provisions of
Section X hereof, payment of the Adviser's compensation for the preceding month
shall be made as promptly as possible. For so long as a Subadvisory Agreement is
in effect, the Fund acknowledges that the Adviser will pay to the Subadviser, as
compensation for acting as Subadviser to the Fund, the fees specified in the
Subadvisory Agreement.
IX. EXPENSES
The expenses in connection with the management of the Fund shall be allocated
between the Fund and the Adviser as follows:
A. Expenses of the Adviser
The Adviser shall pay:
1. the salaries, employment benefits and other related costs and
expenses of those of its personnel engaged in providing investment advice to the
Fund, including without limitation, office space, office equipment, telephone
and postage costs;
2. all fees and expenses of all Trustees, officers and employees, if
any, of the Fund who are employees of the Adviser or an affiliated entity,
including any salaries and employment benefits payable to those persons;
B. Expenses of the Fund
The Fund shall pay:
1. investment advisory fees pursuant to this Agreement;
2. brokers' commissions, issue and transfer taxes or other transaction
fees payable in connection with any transactions in the securities in the Fund's
investment portfolio or other investment transactions incurred in managing the
Fund's assets, including portions of commissions that may be paid to reflect
brokerage research services provided to the Adviser;
3. fees and expenses of the Fund's independent accountants and legal
counsel and the independent Trustees' legal counsel;
4. fees and expenses of any administrator, transfer agent,
custodian, dividend, accounting, pricing or disbursing agent of the Fund;
5. interest and taxes;
6. fees and expenses of any membership in the Investment Company
Institute or any similar organization in which the Board deems it advisable
for the Fund to maintain membership;
7. insurance premiums on property or personnel (including officers
and Trustees) of the Fund which benefit the Fund;
8. all fees and expenses of the Fund's Trustees, who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Adviser;
9. expenses of preparing, printing and distributing proxies, proxy
statements, prospectuses and reports to shareholders of the Fund, except for
those expenses paid by third parties in connection with the distribution of Fund
shares and all costs and expenses of shareholders' meetings;
10. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares of the Fund or in
cash;
11. costs and expenses of promoting the sale of shares in the Fund,
including preparing prospectuses and reports to shareholders of the Fund,
provided, nothing in this Agreement shall prevent the charging of such costs to
third parties involved in the distribution and sale of Fund shares;
12. fees payable by the Fund to the Commission or to any state
securities regulator or other regulatory authority for the registration of
shares of the Fund in any state or territory of the United States or in the
District of Columbia;
13. all costs attributable to investor services, administering
shareholder accounts and handling shareholder relations, (including, without
limitation, telephone and personnel expenses), which costs may also be charged
to third parties by the Adviser; and
14. any other ordinary, routine expenses incurred in the management of
the Fund's assets, and any nonrecurring or extraordinary expenses, including
organizational expenses, litigation affecting the Fund and any indemnification
by the Fund of its officers, Trustees or agents.
X. EXPENSE LIMITATION
If, for any fiscal year, the total of all ordinary business expenses payable by
the Fund, including all investment advisory fees but excluding brokerage
commissions, distribution fees, taxes, interest and extraordinary expenses and
certain other excludable expenses, would exceed the most restrictive expense
limits imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are offered for sale (unless a waiver is obtained), the
Adviser shall reduce its advisory fee to the extent necessary to meet such
expense limit, but the Adviser will not be required to reimburse the Fund for
any ordinary business expenses which exceed the amount of its advisory fee for
such fiscal year. The amount of any such reduction is to be borne by the Adviser
and shall be deducted from the monthly advisory fee otherwise payable to the
Adviser during such fiscal year. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.
XI. ADDITIONAL SERVICES
Upon the request of the Board, the Adviser may perform certain accounting,
shareholder servicing or other administrative services on behalf of the Fund
that are not required by this Agreement. Such services will be performed on
behalf of the Fund and the Adviser may receive from the Fund such reimbursement
for costs or reasonable compensation for such services as may be agreed upon
between the Adviser and the Board on a finding by the Board that the provision
of such services by the Adviser is in the best interests of the Fund and its
shareholders. Payment or assumption by the Adviser of any Fund expense that the
Adviser is not otherwise required to pay or assume under this Agreement shall
not relieve the Adviser of any of its obligations to the Fund nor obligate the
Adviser to pay or assume any similar Fund expense on any subsequent occasions.
Such services may include, but are not limited to, (a) the services of a
principal financial officer of the Fund (including applicable office space,
facilities and equipment) whose normal duties consist of maintaining the
financial accounts and books and records of the Fund and the services (including
applicable office space, facilities and equipment) of any of the personnel
operating under the direction of such principal financial officer; (b) the
services of staff to respond to shareholder inquiries concerning the status of
their accounts, providing assistance to shareholders in exchanges among the
investment companies managed or advised by the Adviser, changing account
designations or changing addresses, assisting in the purchase or redemption of
shares; or otherwise providing services to shareholders of the Fund; and (c)
such other administrative services as may be furnished from time to time by the
Adviser to the Fund at the request of the Board.
XII. NONEXCLUSIVITY
The services of the Adviser to the Fund are not to be deemed to be exclusive,
and the Adviser shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other activities,
so long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers and directors of the Adviser may serve as
officers or trustees of the Fund, and that officers or trustees of the Fund may
serve as officers or directors of the Adviser to the extent permitted by law;
and that the officers and directors of the Adviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors or trustees of any
other firm or trust, including other investment companies.
XIII. TERM
This Agreement shall become effective at the close of business on the date
hereof and shall remain in force and effect, subject to Paragraphs XIV and XV
hereof and approval by the Fund's shareholders, for a period of two years from
the date hereof.
XIV. RENEWAL
Following the expiration of its initial two-year term, the Agreement shall
continue in force and effect from year to year, provided that such continuance
is specifically approved at least annually:
A. 1. by the Fund's trustees, or
2. by the vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and
B. by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Fund), by votes cast in person at a meeting
specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Trustees or by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by the Adviser, on sixty (60) days' written notice to the other party. The
notice provided for herein may be waived by the party required to be notified.
This Agreement shall automatically terminate in the event of its "assignment",
as that term is defined in Section 2(a)(4) of the 1940 Act.
XVI. LIABILITY
A. Liability of the Adviser
The Adviser shall be liable to the Fund and shall indemnify the Fund for
any losses incurred by the Fund, whether in the purchase, holding or sale of any
security or otherwise, to the extent that such losses resulted from an act or
omission on the part of the Adviser or its officers, Trustees or employees, that
is found to involve willful misfeasance, bad faith or negligence, or reckless
disregard by the Adviser of its duties under this Agreement, in connection with
the services rendered by the Adviser hereunder.
B. Liability of the Fund, the Shareholders and the Trustees
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the trustees of the Fund as trustees
and not individually and that the obligations of this instrument are not binding
upon any of the trustees or shareholders individually but are binding only upon
the assets and property of the Fund. No provision of this Agreement shall be
construed to protect any trustees or officer of the Fund or director or officer
of the Adviser, from liability in violation of Section 17(h) and (i) of the 1940
Act.
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such addresses shall be:
if to the Fund or the Adviser:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attention: Secretary
XVIII. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in the provisions of this Agreement
is revised by rule, regulation or order of the Commission, such provisions shall
be deemed to incorporate the effect of such rule, regulation or order.
XIX. SERVICE MARK
The service mark of the Fund and the name "Aetna" have been adopted by the Fund
with the permission of Aetna Life and Casualty Company and their continued use
is subject to the right of Aetna Life and Casualty Company to withdraw this
permission in the event the Adviser or another subsidiary or affiliated
corporation of Aetna Life and Casualty Company should not be the investment
adviser of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the ____ day of _______________,
199__.
<TABLE>
<CAPTION>
<S> <C>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Attest:
By:
Name:
________________________ Title:
AETNA GET FUND, SERIES C
Attest:
By:
Name:
________________________ Title:
</TABLE>
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made by and among AETNA LIFE INSURANCE AND ANNUITY COMPANY, a
Connecticut insurance corporation (the "Adviser"), AETNA GET FUND, a
Massachusetts Business Trust, on behalf of its Series C (the "Fund") and AELTUS
INVESTMENT MANAGEMENT, INC., a Connecticut corporation (the "Subadviser") as of
the date set forth below.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company, under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, both the Adviser and the Subadviser are registered with the Commission
as investment advisers under the Investment Advisers Act of 1940, as amended
(the "Advisers Act") and both are in the business of acting as investment
advisers; and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement with the
Fund (the "Investment Advisory Agreement") which appoints the Adviser as the
investment adviser for the Fund; and
WHEREAS, Article IV of the Investment Advisory Agreement authorizes the Adviser
to delegate all or a portion of its obligations under the Investment Advisory
Agreement to a subadviser;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement, the Adviser and the Fund
hereby appoint the Subadviser to manage the assets of the Fund as set forth
below in Section II, under the supervision of the Adviser and subject to the
approval and direction of the Fund's Board of Trustees (the "Board"). The
Subadviser hereby accepts such appointment and agrees that it shall, for all
purposes herein, undertake such obligations as an independent contractor and not
as an agent of the Adviser. The Subadviser agrees, that except as required to
carry out its duties under this Agreement or otherwise expressly authorized, it
has no authority to act for or represent the Fund in any way.
II. DUTIES OF THE SUBADVISER AND THE ADVISER
A. Duties of the Subadviser
The Subadviser shall regularly provide investment advice with respect to
the assets held by the Fund and shall continuously supervise the investment and
reinvestment of cash, securities and instruments or other property comprising
the assets of the Fund. In carrying out these duties, the Subadviser shall:
1. select the securities to be purchased, sold or exchanged by the
Fund or otherwise represented in the Fund's investment portfolio, place trades
for all such securities and regularly report thereon to the Adviser and, at
the request of the Adviser, to the Board;
2. formulate and implement continuing programs for the purchase and
sale of securities and regularly report thereon to the Adviser and, at the
request of the Adviser or the Fund, to the Board;
3. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally, the Fund, securities held by
or under consideration for the Fund, or the issuers of those securities;
4. provide economic research and securities analyses as requested by
the Adviser from time to time, or as the Adviser considers necessary or
advisable in connection with the Subadviser's performance of its duties
hereunder; and
5. give instructions to the custodian and/or sub-custodian of the
Fund appointed by the Board, as to deliveries of securities, transfers of
currencies and payments of cash for the Fund, in relation to the matters
contemplated by this Agreement; and
6. provide such financial support, administrative and other services,
such as preparation of financial data, determination of the Fund's net asset
value, preparation of financial and performance reports, as the Adviser from
time to time, deems necessary and appropriate and which the Subadviser is
willing and able to provide.
B. Duties of the Adviser
The Adviser shall retain responsibility for oversight of all activities of
the Subadviser and for monitoring its activities on behalf of the Fund. In
carrying out its obligations under this Agreement and the Investment Advisory
Agreement, the Adviser shall:
1. monitor the investment program maintained by the Subadviser for the
Fund and the Subadviser's compliance program to ensure that the Fund's assets
are invested in compliance with the Subadvisory Agreement and the Fund's
investment objectives and policies as adopted by the Board and described in the
most current effective amendment of the registration statement for the Fund, as
filed with the Commission under the Securities Act of 1933 (the "1933 Act"), as
amended, and the 1940 Act ("Registration Statement");
2. review all data and financial reports prepared by the Subadviser
to assure that they are in compliance with applicable requirements and meet
the provisions of applicable laws and regulations;
3. file all periodic reports required to be filed by the Fund with
the applicable regulatory authorities;
4. review and deliver to the Board all financial, performance and
other reports prepared by the Subadviser under the provisions of this
Agreement or as requested by the Adviser;
5. establish and maintain regular communications with the Subadviser
to share information it obtains concerning the effect of developments and data
on the investment program maintained by the Subadviser;
6. maintain contact with and enter into arrangements with the
custodian, transfer agent, auditors, outside counsel, and other third parties
providing services to the Fund;
7. oversee all matters relating to (i) the offer and sale of shares of
the Fund, including promotions, marketing materials, preparation of
prospectuses, filings with the Commission and state securities regulators, and
negotiations with broker-dealers; (ii) shareholder services, including,
confirmations, correspondence and reporting to shareholders; (iii) all corporate
matters on behalf of the Fund, including monitoring the corporate records of the
Fund, maintaining contact with the Board, preparing for, organizing and
attending meetings of the Board and the Fund's shareholders; (iv) preparation of
proxies when required; and (v) any other matters not expressly delegated to the
Subadviser by this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Subadviser
The Subadviser hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Subadviser 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 Subadviser is registered as an investment adviser
with the Commission under the Advisers Act, and is registered or licensed as an
investment adviser under all of the laws of all jurisdictions in which its
activities require it to be so registered or licensed. The Subadviser shall
maintain such registration or license in effect at all times during the term of
this Agreement.
3. Regulatory Orders. The Subadviser is not subject to any stop orders,
injunctions or other orders of any regulatory authority affecting its ability to
carry out the terms of this Agreement. The Subadviser will notify the Adviser
and the Fund immediately if any such order is issued or if any proceeding is
commenced that could result in such an order.
4. Compliance. The Subadviser has in place compliance systems and
procedures designed to meet the requirements of the Advisers Act and the 1940
Act and it shall at all times assure that its activities in connection with
managing the Fund follow these procedures.
5. Authority. The Subadviser is authorized to enter into this
Agreement and carry out the terms hereunder.
6. Best Efforts. The Subadviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations hereunder.
B. Representations and Warranties of the Adviser
The Adviser hereby represents and warrants to the Subadvisor as follows:
1. Due Incorporation and Organization. The Adviser is duly
organized and is in good standing under the laws of the State of Connecticut
and is fully authorized to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser
with the Commission under the Advisers Act, and is registered or licensed as an
investment adviser under all of the laws of all jurisdictions in which its
activities require it to be so registered or licensed. The Adviser shall
maintain such registration or license in effect at all times during the term of
this Agreement.
3. Regulatory Orders. The Adviser is not subject to any stop orders,
injunctions or other orders of any regulatory authority affecting its ability to
carry out the terms of this Agreement. The Adviser will notify the Subadviser
and the Fund immediately if any such order is issued or if any proceeding is
commenced that could result in such an order.
4. Authority. The Adviser is authorized to enter into this
Agreement and carry out the terms hereunder.
5. Best Efforts. The Adviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations hereunder.
C. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly
formed as a business trust under the laws of the Commonwealth of Massachusetts
and it is authorized to enter into this Agreement and carry out its
obligations hereunder.
2. Registration. The Fund is registered as an investment company with
the Commission under the 1940 Act and shares of the Fund are registered for
offer and sale to the public under the 1933 Act and all applicable state
securities laws. Such registrations will be kept in effect during the term of
this Agreement.
IV. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Subadviser shall place all orders for the purchase and sale of
portfolio securities for the Fund with brokers or dealers selected by the
Subadviser, which may include brokers or dealers affiliated with the Subadviser.
The Subadviser shall use its best efforts to seek to execute portfolio
transactions at prices that are advantageous to the Fund giving consideration to
the services and research provided and at commission rates that are reasonable
in relation to the benefits received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to the Fund and/or the other accounts over which the Subadviser or
its affiliates exercise investment discretion. The Subadviser may also select
brokers or dealers to effect transactions for the Fund who provide payment for
expenses of the Fund. The Subadviser is authorized to pay a broker or dealer who
provides such brokerage and research services or expenses, a commission for
executing a portfolio transaction for the Fund that is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if the Subadviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage, research and
other 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 Subadviser and its affiliates have with
respect to accounts over which they exercise investment discretion. The Board
shall periodically review the commissions paid by the Fund to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits received.
V. CONTROL BY THE BOARD OF TRUSTEES
Any investment program undertaken by the Subadviser pursuant to this Agreement,
as well as any other activities undertaken by the Subadviser at the direction of
the Adviser with respect to the Fund, shall at all times be subject to any
directives of the Board.
VI. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Subadviser shall be
att times conform to:
A. all applicable provisions of the 1940 Act, the Advisers Act and any
rules and regulations adopted thereunder;
B. all policies and procedures of the fund as adopted by the Board and
as described in the Registration Statement;
C. the provisions of the Declaration of Trust of the Fund, as amended
from time to time;
D. the provisions of the Bylaws of the Fund, as amended from time to
time; and
E. any other applicable provisions of state or federal law.
VII. COMPENSATION
A. Payment Schedule
The Adviser shall pay the Subadviser, as compensation for services rendered
hereunder, from its own assets, an annual fee of up to .35% of the average daily
net assets in the Fund, payable monthly. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily at
the rate of 1/365 of the annual Subadvisory fee of up to .35% applied
to the daily net assets of the Fund. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees set
forth above.
B. Reduction
Payment of the Subadviser's compensation for the preceding month shall be
made as promptly as possible, except as provided below. The Subadviser
acknowledges that, pursuant to the Investment Advisory Agreement, the Adviser
has agreed to reduce its fee or reimburse the Fund if the expenses borne by the
Fund exceed the expense limitations applicable to the Fund imposed by the
securities laws or regulations of any jurisdiction in which the Fund shares are
qualified for sale. Accordingly, the Subadviser agrees that, if, for any fiscal
year, the total of all ordinary business expenses of the Fund, including all
investment advisory fees but excluding brokerage commissions, distribution fees,
taxes, interest, extraordinary expenses and certain other excludable expenses,
would exceed the most restrictive expense limits imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are offered
for sale (unless a waiver is obtained), the Subadviser shall reduce its advisory
fee to the extent necessary to meet such expense limit, but will not be required
to reimburse the Fund for any ordinary business expenses which exceed the amount
of its advisory fee for the fiscal year. The Subadviser shall contribute to the
amount of such reduction by reimbursing the Adviser in proportion to the amounts
which the Adviser and Subadviser would have been entitled to receive for such
year. For the purposes of this paragraph, the term "fiscal year" shall exclude
the portion of the current fiscal year which elapsed prior to the effective date
of this Agreement, but shall include the portion of the then current fiscal year
has elapsed at the date of termination of this Agreement.
VIII. ALLOCATION OF EXPENSES
The Subadviser shall pay the salaries, employment benefits and other related
costs of those of its personnel engaged in providing investment advice to the
Fund hereunder, including, but not limited to, office space, office equipment,
telephone and postage costs. In the event the Subadviser incurs any expense that
is the obligation of the Adviser as set out in this Agreement, the Adviser shall
reimburse the Subadviser for such expense on presentation of a statement
indicating the expenses incurred and the amount paid by the Subadviser.
IX. NONEXCLUSIVITY
The services of the Subadviser with respect to the Fund are not to be deemed to
be exclusive, and the Subadviser shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed that
officers or directors of the Subadviser may serve as officers or directors of
the Adviser or officers or trustees of the Fund; that officers or directors of
the Adviser or officers or trustees of the Fund may serve as officers or
directors of the Subadviser to the extent permitted by law; and that the
officers and directors 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 or trustees of any other firm or
trust, including other investment advisory companies.
X. TERM
This Agreement shall become effective at the close of business on _________,
1996, and shall remain in force and effect through December 31, 1997, unless
earlier terminated under the provisions of Article XI. Following the expiration
of its initial term, the Agreement shall continue in force and effect for one
year periods, provided such continuance is specifically approved at least
annually:
A. (1) by the Fund's trustees or (2) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), and
B. by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a trustee of the Fund), by votes cast in person at a meeting
specifically called for such purpose.
XI. TERMINATION
This Agreement may be terminated:
A. at any time, without the payment of any penalty, by vote of the
Fund's trustees or by vote of a majority of the outstanding voting securities
of the Fund; or
B. by the Adviser, the Fund or the Subadviser on sixty (60) days'
written notice to the other party, unless written notice is waived by the
party required to be notified; or
C. automatically in the event there is an "assignment" of this
Agreement, as defined in Section 2 (a) (4) of the 1940 Act.
XII. LIABILITY
A. Liability of the Subadviser
The Subadviser shall be liable to the Fund and the Adviser and shall
indemnify the Fund and the Adviser for any losses incurred by the Fund, or the
Adviser 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 Subadviser or its officers, directors or employees, that is found to involve
willful misfeasance, bad faith or negligence, or reckless disregard by the
Subadviser of its duties under this Agreement, in connection with the services
rendered by the Subadviser hereunder.
B. Liability of the Fund, the Shareholders and the Trustees
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the trustees of the Fund as trustees
and not individually and that the obligations of this instrument are not binding
upon any of the trustees or shareholders individually but are binding only upon
the assets and property of the Fund. No provision of this Agreement shall be
construed to protect any trustee or officer of the Fund or director or officer
of the Adviser, from liability in violation of Section 17(h) and (i) of the 1940
Act.
XIII. 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 address shall be the following
addresses:
if to the Fund or the Adviser:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attn: Secretary
if to the Subadviser:
242 Trumbull Street
Hartford, Connecticut 06103-1205
Fax number: 860/275-4440
Attention: President
XIV. 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, regulations or orders
of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in any provision of the Agreement is
revised by rule, regulation or order of the Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
XV. SERVICE MARK
The service mark of the Fund and Adviser, and the name "Aetna" have been adopted
by the Fund with the permission of Aetna Life and Casualty Company and their
continued use is subject to the right of Aetna Life and Casualty Company to
withdraw this permission in the event the Subadviser or another subsidiary or
affiliated corporation of Aetna Life and Casualty Company should not be the
investment adviser of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the ____ day of ______________,
19__.
<TABLE>
<CAPTION>
<S> <C>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Attest:
By:
Name:
________________________ Title:
AETNA INVESTMENT MANAGEMENT, INC.
Attest:
By:
Name:
________________________ Title:
AETNA GET FUND, SERIES C
Attest:
By:
Name:
________________________ Title:
</TABLE>
AETNA GET FUND
UNDERWRITING AGREEMENT
THIS AGREEMENT, is entered into this ___ day of ___________, 1996, by and
between Aetna Life Insurance and Annuity Company, ("Aetna") and AETNA GET FUND,
a Massachusetts Business Trust (the "Fund"), on behalf of its Series C.
WHEREAS, the Fund is an open-end management investment company registered with
the Securities and Exchange Commission (Commission) under the Investment Company
Act of 1940, as amended (1940 Act) authorized to issue shares of distinct
investment portfolios; and
WHEREAS the Fund has registered the shares of its common stock (Shares) in its
Series C for offer and sale to the public under the Securities Act of 1933, as
amended; and
WHEREAS, the Fund wishes to retain Aetna, and Aetna is willing to act, as
principal underwriter in connection with the offer and sale of the Shares; and
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Appointment of Underwriter. The Fund hereby appoints Aetna and Aetna hereby
accepts appointment as underwriter in connection with the distribution of the
Shares. The Fund authorizes Aetna to solicit orders for the purchase of the
Shares as set forth in the Registration Statement currently effective with the
Commission for the Shares. It is understood that the Shares are offered only
through variable annuity contracts and variable life policies issued by Aetna
and its affiliates.
2. Compensation. Aetna shall receive no separate compensation for providing
services under this Agreement. It is understood that the compensation Aetna
receives in connection with the issuance of the variable annuity contracts or
variable life policies shall be the only consideration it receives for serving
as underwriter hereunder.
3. Aetna Expenses. Aetna shall be responsible for any costs of printing and
distributing prospectuses and statements of additional information necessary to
offer and sell the Shares, and such other sales literature, reports, forms and
advertisements in connection as it elects to prepare, provided such materials
comply with the applicable provisions of federal and state law.
4. Fund Expenses. The Fund shall be responsible for the costs of registering
the Shares with the Commission and for the costs of preparing prospectuses,
statements of additional information and such other documents as are required
to maintain the registration of the Shares with the Commission.
5. Share Certificates. The Fund shall not issue certificates representing
Shares.
6. Status of underwriter and Other Persons. Aetna is an independent contractor
and shall be agent for the Fund only in respect to the sale and redemption of
the Shares. Any person, even though also an officer, director, employee or agent
of Aetna, who may be or become an officer, director, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Aetna even though paid by Aetna.
7. Nonexclusivity. The services of Aetna to the Fund under this Agreement are
not to be deemed exclusive, and Aetna shall be free to render similar services
or other services to others and to engage in other activities related or
unrelated to those provided under this Agreement.
8. Effectiveness and Termination of Agreement. This Agreement shall become
effective at the close of business on the date set forth in the first paragraph
of this Agreement and shall remain in force and effect, through December 31,
1997, unless earlier terminated under the provisions of Section 9. Following the
expiration of its initial term, the Agreement shall continue in force and effect
for one year periods, provided such continuance is specifically approved at
least annually by the Fund's trustees, or by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the 1940
Act.
9. Termination. This Agreement may be terminated at any time, by either
party, without the payment of any penalty, on sixty (60) days' written notice to
the other party.
10. Liability of Aetna. Aetna shall be liable to the Fund and shall indemnify
the Fund for any losses incurred by the Fund, to the extent that such losses
resulted from an act or omission on the part of Aetna or its officers, directors
or employees in carrying out its duties hereunder, that is found to involve
willful misfeasance, bad faith or negligence, or reckless disregard by Aetna of
its duties under this Agreement.
11. Liability of Trustees. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the trustees of the
Fund as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees or shareholders individually
but are binding only upon the assets and property of the Fund. No provision of
this Agreement shall be construed to protect any trustee or officer of the Fund
or director or officer of the Aetna, from liability in violation of Section
17(h) and (i) of the 1940 Act.
12. Amendments. This Agreement may be amended or changed only by an instrument
in writing signed by both parties.
13. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of Connecticut and the 1940 Act. To the extent that the
applicable laws of the State of Connecticut conflict with the applicable
provisions of the 1940 Act, however, the latter shall control.
14. Notices. Any notices under this Agreement shall be in writing, addressed and
delivered, mailed postage paid, or sent by other delivery service, or by
facsimile transmission to each party at such address as each party may designate
for the receipt of notice. Until further notice, such addresses shall be:
if to the Fund or Aetna:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
15. 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, regulations or orders of the Commission issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
the provisions of this Agreement is revised by rule, regulation or order of the
Commission, such provisions shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the ___ day of _______________,
199__.
<TABLE>
<CAPTION>
<S> <C>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Attest:
By:
Name:
________________________ Title:
Secretary
AETNA GET FUND
Attest:
By:
Name:
________________________ Title:
Secretary
</TABLE>
Custodian Agreement
between
Mellon Bank, N.A.
and
Aetna GET Fund
INDEX
Paragraph Page
1. Appointment............................................................
2. Delivery of Documents..................................................
3. Definitions............................................................
4. Delivery and Registration of the Property..............................
5. Receipt and Disbursement of Money......................................
6. Receipt of Securities..................................................
7. Use of Book-Entry System...............................................
8. Instructions Consistent with Charter, Etc..............................
9. Transactions Not Requiring Instructions................................
10. Transactions Requiring Instructions...................................
11. Segregated Accounts; Securities Lending...............................
12. Dividends and Distributions...........................................
13. Purchases of Securities...............................................
14. Sales of Securities...................................................
15. Records...............................................................
16. Reports...............................................................
17. Cooperation with Accountants..........................................
18. Confidentiality.......................................................
19. Right to Receive Advise...............................................
20. Compensation..........................................................
22. Responsibility of the Bank............................................
23. Collections...........................................................
24. Duration and Termination..............................................
25. Notices...............................................................
26. Further Actions.......................................................
27. Amendments............................................................
28. Counterparts..........................................................
29. Miscellaneous.........................................................
CUSTODIAN AGREEMENT
THIS AGREEMENT is made by and between AETNA GET FUND., a Massachusetts
Business Trust (the "Fund"), and MELLON BANK, N.A., a national banking
association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") which currently issues five series of shares, each of which
represents a separate investment portfolio and which may create additional
series in the future; and
WHEREAS, the Fund, for which Aetna Life and Annuity Company ("Adviser")
serves as investment adviser, desires to retain the Bank to serve as the Fund's
custodian for each such existing investment portfolio except the Aetna
International Growth Fund, as well as for some or all of any additional series
created by the Fund in the future and the Bank is willing to serve as custodian
for each such series on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Bank to act as custodian of
the portfolio securities, cash and other property belonging to the Fund for the
period and on the terms set forth in this Agreement. The Bank accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 20 of this Agreement. The Bank agrees
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. It is understood that each of the Funds' series
represents a separate investment portfolio of the Fund and, accordingly, that
the Bank shall identify to each such series Property belonging to such series
and in such reports, confirmations and notices to the Fund called for under
this Agreement shall identify the series to which such report,
confirmation or notice pertains.
2. Delivery of Documents. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of the Bank as custodian of the portfolio securities, cash and other
property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's
officers and/or officers of the Fund's Adviser authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Fund;
(c) The Fund's Articles of Incorporation as filed with the Department
of Assessments and Taxation of the State of Maryland and all amendments thereto
(such Articles of Incorporation, as presently in effect and as they shall from
time to time be amended, are herein called the "Charter");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) The Investment Advisory Agreement currently in effect (the
"Advisory Agreement") between the Fund and its Adviser; and
(f) The Fund's most recent prospectus and statement of additional
information relating to shares of the Fund's Common Stock ("Shares") (such
prospectus and statement of additional information as presently in effect and
all amendments and supplements thereto are herein called the "Prospectus");
The Fund will furnish the Bank from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Fund or the Adviser
(whether or not any such person is an officer or employee of the Fund): (i) who
is duly authorized by the Board of Directors of the Fund or under the terms of
the Advisory Agreement, the Charter or the By-Laws, as each may from time to
time be amended, to act on behalf of the Fund; and (ii) whose name is listed on
the Certificate annexed hereto as Appendix A or any amendment thereto as may be
received by the Bank from time to time.
(b) "Book-Entry System". As used in this Agreement, the term "Book-
Entry System" means the Federal Reserve Treasury book-entry system for United
States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the Securities and Exchange Commission (the "SEC") under Section
17A of the Securities Exchange Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Bank from an
Authorized Person or from a person reasonably believed by the Bank to be an
Authorized Person. The Fund agrees to deliver to the Bank, at the time and in
the manner specified in Paragraph 8(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(d) "Property". The term "Property", as used in this Agreement,
means:
(i) any and all securities and other property which the Fund may
from time to time deposit, or cause to be deposited, with the Bank or which the
Bank may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by the Bank from time to time from or on behalf of the Fund.
(e) "Written Instructions". As used in this Agreement, the term "Written
Instructions" means written instructions delivered by hand (including Federal
Express or other express courier), certified or registered mail, return receipt
requested, tested telegram, cable, telex or facsimile sending device, received
by the Bank and signed by an Authorized Person and shall also include computer
transmission with coded access as agreed upon by the Bank and the Fund.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to the Bank all securities and all moneys owned by it,
including cash received for the issuance of Shares, at any time during the
period of this Agreement. The Bank will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to the
Bank (other than in bearer form) shall be registered in the name of the Fund or
in the name of a nominee of the Fund or in the name of any nominee of the Bank
(with or without indication of fiduciary status), or in the name of any
sub-custodian or any nominee of any such sub-custodian appointed pursuant to
Paragraph 6 hereof or shall be properly endorsed and in form for transfer
satisfactory to the Bank.
5. Receipt and Disbursement of Money.
(a) Not less frequently than once on the afternoon of each business
day, all cash held in the custody account, other than cash required to settle
securities transactions on such business day, shall be transferred to the
trustee under a Trust Agreement of even date herewith between the Bank and the
Fund and attached hereto as Exhibit A.
The Bank shall make payments of cash to, or for the account of, the Fund
from such cash only (i) for the purchase of securities for the Fund's portfolio
as provided in Paragraph 13 hereof; (ii) upon receipt of Written Instructions,
for the payment of interest, dividends, taxes, fees or expenses of the Fund;
(iii) upon receipt of Written instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and held by or to be delivered to the Bank; (iv) to a sub-custodian
pursuant to Paragraph 6 hereof; (v) for the redemption of Shares; (vi) for
payment of the amount of dividends received in respect of securities sold short
against the box; or (vii) upon receipt of Written Instructions, for other proper
Fund purposes. No payment pursuant to (i) above shall be made unless the Bank
has received a copy of the broker's or dealer's confirmation or the payee's
invoice, as appropriate.
(b) The Bank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, the Bank shall hold and
physically segregate in a separate account, identifiable at all times from those
of any other persons, firms, or corporations, all securities and non-cash
property received by it for the account of the Fund. All such securities and
non-cash property are to be held or disposed of by the Bank for the Fund
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolution of the Fund's Board of Directors
authorizing the transaction, the Bank shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments except in accordance with the express terms provided
for in this Agreement. In no case may any director, officer, employee or agent
of the Fund withdraw any securities.
In connection with its duties under this Paragraph 6, the Bank may, at
its own expense, enter into sub-custodian agreements with other banks or trust
companies for the receipt of certain securities and cash to be held by the Bank
for the account of the Fund pursuant to this Agreement, provided that each such
bank or trust company has an aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than ten million dollars
($10,000,000) and that such bank or trust company agrees with the Bank to comply
with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Bank shall remain responsible for the performance of
all of its duties under this Agreement and shall hold the Fund harmless from the
acts and omissions, under the standards of care applicable to the Bank under
Paragraph 22 hereof, of any bank or trust company that it might choose pursuant
to this Paragraph 6 or of the Book-Entry System.
(b) Where securities are transferred to an account of the Fund
established pursuant to Paragraph 7 hereof, the Bank shall also by book-entry or
otherwise identify as belonging to the Fund the quantity of securities in a
fungible bulk of securities registered in the name of the Bank (or its nominee)
or shown in the Bank's account on the books of the Book-Entry System. The Bank
shall furnish the Fund with reports relating to Property held for the Fund under
this Agreement in accordance with Paragraph 16 hereof.
7. Use of Book-Entry System. The Fund shall deliver to the Bank certified
resolutions of the Board of Directors of the Fund approving, authorizing and
instructing the Bank on a continuous and on-going basis until instructed to the
contrary by Oral or Written Instructions actually received by the Bank (a) to
deposit in the Book-Entry System all securities belonging to the Fund eligible
for deposit therein and (b) to use the Book-Entry System to the extent possible
in connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. Without
limiting the generality of such use, it is agreed that the following provisions
shall apply thereto:
(a) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled by
the Bank in other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities.
(b) All books and records maintained by the Bank which relate to the
Fund's participation in the Book-Entry System will at all times during the
Bank's regular business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(c) The Bank will provide the Fund with copies of any report obtained by
the Bank on the system of internal accounting control of the Book-Entry System
promptly after receipt of such a report by the Bank. The Bank will also provide
the Fund with such reports on its own system of internal control as the Fund may
reasonably request from time to time.
8. Instructions Consistent with Charter, Etc.
(a) Unless otherwise provided in this Agreement, the Bank shall act only
upon Oral and Written Instructions. Although the Bank may know of the provisions
of the Charter and By-Laws of the Fund, the Bank may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent with any
provisions of such Charter or By-Laws or any vote, resolution or proceeding or
the Fund's shareholders, or of its board of directors, or of any committee
thereof.
(b) the Bank shall be entitled to rely upon any Oral Instructions and
any Written Instructions actually received by the Bank pursuant to this
Agreement. The Fund agrees to forward to the Bank Written Instructions
confirming Oral Instructions in such manner that the Written Instructions are
received by the Bank by the close of business of the same day that such Oral
Instructions are given to the Bank. The Fund agrees that the fact that such
confirming Written Instructions are not received by the Bank shall in no way
affect the validity of the transactions or enforceability of the transactions
authorized by the Fund by giving Oral Instructions. The Fund agrees that the
Bank shall incur no liability to the Fund in acting upon Oral Instructions given
to the Bank hereunder concerning such transactions, provided such instructions
reasonably appear to the Bank to have been received from an Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, the Bank is authorized to take the following actions:
(a) Collections of Income and Other Payments. The Bank shall:
(i) collect and receive for the account of the Fund, all income
and other payments and distributions, including (without limitation) stock
dividends, rights, bond coupons, option premiums and similar items, included or
to be included in the Property, and promptly advise the Fund of such receipt and
shall credit such income, as collected, to the Fund's custodian account;
(ii) endorse and deposit for collection, in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same day as
received;
(iii) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio securities as a result of a
stock dividend, share split-up or reorganization, recapitalization, readjustment
or other rearrangement or distribution of rights or similar securities issued
with respect to any portfolio securities belonging to the Fund held by the Bank
hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or otherwise
become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in connection
with the collection and receipt of such income and other payments and the
endorsement for collection of checks, drafts, and other negotiable instruments
as described in Paragraph 23 of this Agreement.
(b) Miscellaneous Transactions. The Bank is authorized to deliver or
cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary securities
for definitive securities; and
(iii) for transfer of securities into the name of the Fund or the
Bank or nominee of either, or for exchange of securities for a different number
of bonds, certificates, or other evidence, representing the same aggregate face
amount or number of units bearing the same interest rate, maturity date and call
provisions, if any; provided that, in any such case, the new securities are to
be delivered to the Bank.
10. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, the Bank, directly or through the use
of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said Oral or Written Instructions to be
for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
(e) release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to the Bank of the monies to be received by the Bank in accordance with
such Oral or Written Instructions, except that in cases where additional
collateral is required to secure a borrowing already made, in which case and
subject to receipt by the Bank of "Oral or Written Instructions", further
securities may be released for that purpose; an repay such loan upon redelivery
to it of the securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
(f) release and deliver securities owned by the Fund in connection with
any repurchase agreement entered into on behalf of the Fund, but only on receipt
of payment therefor; and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
11. Segregated Accounts; Securities Lending.
(a) the Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated account or accounts on its records for and
on behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities in the Book-Entry System (i) for the
purposes of compliance by the Fund with the procedures required by a securities
or option exchange, provided such procedures comply with the 1940 Act and
Investment Company Act Release No. 10666 (April 18, 1979) or any subsequent
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies, and (ii) for other proper corporate
purposes, but only, in the case of clause (ii), upon receipt of Written
Instructions.
(b) The Bank hereby acknowledges that the Fund may require it to enter
into one or more third-party custodial agreements regarding Fund's purchases and
sales of futures contracts and options thereon, and that any such third-party
agreement with a futures commission merchant may contain any provisions which
the Fund and the futures commission merchant reasonably deem necessary and which
do not subject the Bank to higher standards of care (except as may be required
by law) than does this Agreement.
(c) The Fund may, from time to time, furnish the Bank with copies of
securities loan agreements (singly "Securities Loan Agreement" and collectively
"Securities Loan Agreements"), pursuant to which the Fund may lend securities of
any series of the Fund to the respective brokerage firms named therein (singly
the "Brokerage Firm" and collectively the "Brokerage Firms").
In each such case, and until the Fund shall have given the Bank Written
Instructions that such Securities Loan Agreement has terminated, the Fund
authorizes the Bank, as its agent in connection with the lending of securities
from time to time upon receipt by the Bank of Oral or Written
Instructions: (a) to deliver to the Brokerage Firm named in the Securities Loan
Agreement specific securities held for the Fund's account, it being understood
that in each case the Bank will give prompt notice thereof to the Fund; (b) to
receive from the Brokerage Firm a certified or bank cashier's check, in
immediately available funds, or obligations of the U. S. Government in an amount
equal to the then market value of the securities, as specified in such
Instructions.
The Fund will evaluate on a daily basis its rights and obligations
under each Securities Loan Agreement, such as marking to market, and will demand
that additional collateral be delivered to the Bank by the Brokerage Firm under
proper advice to the Bank, or shall give Oral or Written Instructions to the
Bank to release excess collateral to the Brokerage Firm.
The Bank may, through its commercial, trust or other departments, be a
creditor for its own account, or represent in a fiduciary capacity other
creditors and/or customers, or any Brokerage Firm, even though any of such
interests may potentially be in conflict with those of the Fund.
The Fund represents that it has the power and authority to lend the
securities in accordance with a Securities Loan Agreement and that such lending
as provided in such Securities Loan Agreement and as provided herein, has been
duly authorized by all necessary action, has received any required regulatory
approval and will not violate any law, regulation, Charter, By-law or other
instrument, restriction or provision applicable to the Fund.
With respect to acting as agent for the Fund in connection with the
lending of securities to Brokerage Firms pursuant to Securities Loan Agreements,
the Bank shall have no duties or responsibilities except those expressly set
forth herein and the Fund will indemnify the Bank against any liability which it
may incur in connection with such lending in accordance with Paragraph 21
hereof; the Bank shall have no responsibility in connection with the present or
future financial condition of any such Brokerage Firm or any failure on the part
of any such Brokerage Firm or any failure on the part of any such Brokerage Firm
to return any such securities for any reason whatsoever or to comply with any
provision of any Securities Loan Agreement or any failure on the part of any
such Brokerage Firm to comply with any law or regulation, all such risks being
assumed by the Fund.
12. Dividends and Distributions.
The Fund shall furnish the Bank with appropriate evidence of action by the
Fund's Board of Directors declaring and authorizing the payment of any dividends
and distributions. Upon receipt by the Bank of Written Instructions with respect
to dividends and distributions declared by the Fund's Board of Directors and
payable to shareholders of the Fund who have elected in the proper manner to
receive their distributions or dividends in cash, and in conformance with
procedures mutually agreed upon by the Bank, the Fund, and the Fund's transfer
agent, the Bank shall pay to the Fund's transfer agent, as agent for the Fund's
shareholders, an amount equal to the amount indicated in said Written
Instructions as payable by the Fund to such shareholders for distribution in
cash by the transfer agent to such shareholders.
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Fund, through the Advisor, shall deliver to the
Bank Written or Oral Instructions specifying with respect to each such purchase:
(a) the name of the issuer and the title of the securities, (b) the number of
shares or the principal amount purchased and accrued interest, if any, (c) the
date of purchase and settlement, (d) the purchase price per unit, (e) the total
amount payable upon such purchase and (f) the name of the person from whom or
the broker through whom the purchase was made. Oral Instructions shall be
confirmed by Written Instructions. The Bank shall upon receipt of securities
purchased by or for the Fund pay out of the moneys held for the account of the
Fund the total amount payable to the person from whom or the broker through whom
the purchase was made, provided that the same conforms to the total amount
payable as set forth in such Oral Instructions in accordance with current
industry practices.
14. Sales of Securities. Promptly after each decision to sell securities by
the Advisor or exercise of an option written by the Fund, the Fund, through the
Advisor, shall deliver to the Bank Oral or Written Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title of the
security, (b) the number of shares or principal amount sold, and accrued
interest, if any, (c) the date of sale and settlement, (d) the sale price per
unit, (e) the total amount payable to the Fund upon such sale, and (f) the name
of the broker through whom or the person to whom the sale was made. The Bank
shall deliver the securities upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions in accordance with current industry
practice. Subject to the foregoing, the Bank may accept payment in such form as
shall be satisfactory to it, and may deliver securities and arrange for payment
in accordance with the customs prevailing among dealers in securities.
15. Records. The books and records pertaining to the Fund which are in the
possession of the Bank shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times during
the Bank's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by the Bank to the Fund
or the Fund's authorized representative at the Fund's expense.
16. Reports.
(a) The Bank shall furnish the Fund the following reports:
(1) such periodic and special reports as the Fund may
reasonably request;
(2) a daily report detailing all transactions (cash and
securities) that have been posted to the Fund's account; such report, which
shall be in such form as may be agreed upon by the Bank and the Fund from time
to time, shall be received not later than the morning of the business day next
following the day to which the report relates;
(3) statements, at such intervals as the Fund may reasonably
request but not less frequently than monthly, summarizing all transactions and
entries for the account of the Fund, listing the portfolio securities belonging
to the Fund with the adjusted average cost of each issue and the market value at
the end of such month, and stating the cash account of the Fund including
disbursements;
(4) the reports to be furnished to the Fund pursuant to Rule
17f-4 under the 1940 Act; and
(5) such other information as may be agreed upon from time to time
between the Fund and the Bank.
(b) The Bank shall transmit promptly to the Fund any proxy statement,
proxy materials, notice of a call or conversion or similar communications
received by it as Custodian of the Property.
17. Cooperation with Accountants. The Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion, as such may be required from time to time by the Fund.
18. Confidentiality. The Bank agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present, or potential shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Bank may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund.
19. Right to Receive Advise.
(a) Advice of Fund. If the Bank shall be in doubt as to any action to
be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If the Bank shall be in doubt as to any question
of law involved in any action to be taken or omitted by the Bank, it may request
advice at its own cost from counsel of its own choosing (who may be counsel for
the Advisor, the Fund or the Bank, at the option of the Bank).
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by the Bank pursuant to subparagraph
(a) of this Paragraph and advice received by the Bank pursuant to subparagraph
(b) of this Paragraph, the Bank shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of the Bank. The Bank shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraphs (a) or (b) of this
Paragraph which the Bank, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this Paragraph shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to the Bank's properly taking or omitting to
take such action. Nothing in this subsection shall excuse the Bank when an
action or omission on the part of the Bank constitutes willful misfeasance, bad
faith, negligence or reckless disregard by the Bank of any duties or obligations
under this Agreement.
20. Compensation. As compensation for the services rendered by the Bank
during the term of this Agreement, the Fund will pay to the Bank fees in
accordance with the fee schedule agreed upon from time to time in writing by
the Bank and the Fund.
21. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless the Bank and its nominees from all taxes, charges,
expenses, assessments, claims and liabilities and expenses, including attorneys'
fees and disbursements, arising directly or indirectly from any action or thing
which the Bank takes or does or omits to take or do upon receipt of Oral or
Written Instructions or under this Agreement, provided, that neither the Bank
nor any of its nominees shall be indemnified against any liability to the Fund
or to its shareholders (or any expenses incident to such liability) arising out
of the Bank's or such nominee's own willful misfeasance, bad faith, negligence
or reckless disregard of its duties or responsibilities under this Agreement.
22. Responsibility of the Bank.
(a) In the performance of its duties hereunder, the Bank shall be
obligated to exercise care and diligence and to act in good faith and to use its
best efforts to assure the accuracy and completeness of all services performed
under this Agreement. Except as provided in (b) below, the Bank shall be
responsible for all direct losses occasioned by the Bank's negligent failure to
perform its duties under this Agreement, including but not limited to losses
related to inaccuracies in the daily reports (upon which the Fund and its agents
rely in calculating the Fund's net asset value and in determining whether the
Fund is in compliance with the 1940 Act and the requirements of Subchapter M of
the Internal Revenue Code of 1986 (as amended) to be provided under Paragraph 16
hereof or otherwise. However, the Bank shall not be liable for any incidental,
consequential or punitive damages.
(b) The Bank shall assume entire responsibility for loss occasioned by
robbery, burglary, fire, theft or mysterious disappearance irrespective of
whether such losses occur while such Property is in possession of the Bank or
the possession of one of the Bank's agents, nominees, depositories,
correspondents or sub-custodians appointed pursuant to Paragraph 6 hereof or any
Book-Entry System. In the event of any such loss the Bank's liability shall be
limited to the replacement value thereof as of the date of the discovery of such
loss and the Bank, at the Fund's option, shall make prompt replacement of
Property with like kind and quality or shall make prompt restitution to the Fund
for such loss. In addition, in the event of any loss of the Property due to any
other cause, unless the Bank can prove that it and its agents, nominees,
depositories and correspondents were not negligent and did not act with willful
misconduct, the Bank will be liable for such loss. Notwithstanding the
foregoing, the Bank shall not be liable for losses occurring by reason of acts
of civil or military authority, national emergencies, floods, acts of God,
insurrections, wars, riots or similar catastrophes.
(c) The Bank shall not have any duty or obligation to inquire (i) into
the validity or invalidity or authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which the Bank reasonably believes
to be genuine; (ii) the validity or invalidity of the issuance of any securities
included or to be included in the Property, the legality or illegality of the
purchase of such securities, or the propriety or impropriety of the amount paid
therefor; (iii) the legality or illegality of the sale (or exchange) of any
Property or the propriety or impropriety of the amount for which such Property
is sold (or exchanged); or (iv) whether any Property at any time delivered to or
held by the Bank may properly be held by or for the Fund.
23. Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by the Bank) shall be at the sole risk of the Fund, provided that the
Bank agrees to the following procedures:
(i) upon maturity of any security held by the Fund, proceeds
will be credited and available for investment by the Fund on the maturity
date;
(ii) with respect to sales of securities held by the Fund and
provided the Bank receives timely and accurate notification of any such sale,
sale proceeds will be credited and available for investment by the Fund on the
settlement date for transactions settled in Federal funds, and on settlement
date plus one for transactions settled in Clearinghouse funds;
(iii) with respect to income and principal from securities held by
the Fund, where the precise amount to be received is known prior to payable
date, such moneys will be credited to the Fund on the payable date and will be
made available to the Fund for investment on such date in cases where such
moneys are to be received in Federal funds or, in cases where such moneys are to
be received in Clearinghouse funds, on the day following the payable date;
(iv) with respect to any income and principal payment on
securities held by the Fund the amount of which is unknown either by the Bank or
the Adviser, such payments will be credited to the Fund upon receipt by the
Bank, it being understood that the Bank will make every effort to collect such
payments as quickly as possible.
With respect to items referred to in (i), (ii) and (iii) above, in any case
where the Bank does not receive any payment due to the Fund within a reasonable
time after the Bank has made proper demands for the same, it shall so notify the
Fund in writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto and to telephonic
demands, and shall thereafter have the right to reverse the credit previously
posted to the Fund with respect to such item. The Bank shall not be
obliged to take legal action for collection of any unpaid item unless and until
reasonably indemnified to its satisfaction.
24. Duration and Termination. This Agreement shall continue until
termination by the Fund on 60 days written notice or by the Bank on 120 days'
written notice. In the event of such notice of termination, the Fund's Board of
Directors shall, by resolution duly adopted, promptly appoint a Successor
Custodian to serve upon the terms set forth in this Agreement. Upon termination
hereof the Fund shall pay to the Bank such compensation as may be due as of the
date of such termination and shall likewise reimburse the Bank for its
reasonable costs, expenses and disbursements incurred prior to such termination.
The Bank shall have no lien, right of set-off, or claim of any kind whatsoever
against any Property of the Fund (including records relating to the Fund
maintained by the Bank) in the possession of the Bank.
If a Successor Custodian is appointed by the Directors, the Bank shall,
upon termination, deliver to such Successor Custodian the records of the Bank
with respect to the Fund, and duly endorsed and in form for transfer, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank under this Agreement.
In the event that no such Successor Custodian is appointed within 90 days
after the date of such notice of termination by the Bank, Fund will promptly
submit to its shareholders the question whether they wish to terminate the Fund
or to function without a bank custodian, and the Bank shall deliver the funds
and property of the Fund to the Fund only pursuant to a certified copy of a
resolution of the Fund's Board of Directors, signed by a majority of the Board
of Directors of the Fund in the exercise of such power conferred upon
the Fund by its shareholders, such delivery to be made in accordance with such
Resolution.
In the event that the Bank is not notified of the appointment of a
Successor Custodian on or before the date of the termination of this Agreement,
the Bank shall have the right to deliver to a bank or trust company of its own
selection (a) with significant experience in serving as a custodian for
registered investment companies; and (b) having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less than
$10,000,000, all securities, records, and other properties then held by the Bank
to be held by such bank or trust company provided that such bank or trust
company agrees to serve as custodian for such securities, records and other
properties substantially in accordance with the term hereof and in accordance
with its customary fee schedule for such services.
In the event that securities, funds, and other properties remain in the
possession of the Bank after the date of termination hereof owing to failure of
the Board of Directors to appoint a Successor Custodian, the Bank shall be
entitled to fair compensation for its services during such period and the
provisions of this Agreement relating to the duties and obligations of the Bank
shall remain in full force and effect. If any Property remains in the custody of
the Bank pursuant to the preceding sentence for more than six months, the Bank
shall be entitled to receive a premium of one and one-half percent over the fees
to which it would otherwise be entitled for its services for each succeeding
month during which the Bank remains in possession of such property.
25. Notices. All notices and other communications (collectively referred to
as "Notice" or "Notices" in this Paragraph) under this Agreement (other than
Written or Oral Instructions as defined in this Agreement and as referred to in
Paragraph 8 (b)) must be in writing and will be deemed to have been duly given
or delivered when delivered by hand (including by Federal Express or similar
express courier) or three days after being mailed by prepaid registered or
certified mail, return receipt requested: (a) if to the Bank at
the Bank's address, 1735 Market Street, Philadelphia, Pennsylvania 19101-7899,
marked for the attention of Donna Owens, Trust Officer (or her successor); (b)
if to the Fund, at the address of the Fund, 151 Farmington Avenue, Hartford, CT
06156-8962, marked for the attention of the Fund's Treasurer; or (c) to such
other address as shall have been last designated by Notice in accordance with
this Paragraph 25. All postage, cable, telegram, telex and facsimile sending
device charges arising from the sending of a Notice hereunder shall be paid by
the sender.
26. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
27. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
28. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
29. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law. If any provision of this Agreement shall be held
or made invalid by a court decision, statue, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be
binding and shall inure to the benefit of the parties hereto and their
respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on this ____ day of
________________, 1996.
<TABLE>
<CAPTION>
<S> <C>
[SEAL] MELLON BANK, N. A.
Attest:___________________________ By_________________________________
[SEAL] AETNA VARIABLE PORTFOLIOS, INC.
Attest:___________________________ By_________________________________
</TABLE>
EXHIBIT A
TRUST AGREEMENT
THIS TRUST AGREEMENT is made between AETNA VARIABLE PORTFOLIOS, INC., a Maryland
corporation (the "Fund") as Settlor, and MELLON BANK, N. A., a national banking
association (the "Bank") as Trustee.
I. Background: The background of this Agreement is as follows:
A. The Fund is registered as an open-end, diversified management investment
company under the Investment Company Act of 1940, as amended, and currently
issues five classes of shares, each of which represents a separate investment
portfolio;
B. The Fund has retained the Bank to serve as the Fund's custodian under a
Custodian Agreement of even date herewith ("Custodian Agreement") for four of
its series: the Aetna Fund, the Aetna Growth and Income Fund, the Aetna Bond
Fund and the Aetna Money Market Fund and for such additional series as may from
time to time be offered by the Fund on the terms set forth herein (each, a
"Series"), and the Bank is willing to serve as such; and
C. The Fund intends to transfer to the Bank to hold as trustee under this
Agreement all the income and principal cash balances which are transferred to it
in accordance with Paragraph 5(a) of the Custodian Agreement (the Bank in such
capacity is hereinafter referred to as the "Trustee"), and hereby directs the
Trustee to hold such cash balances in accordance with the following terms.
II. Dispositive Terms: The Trustee shall invest and manage the income and
principal cash balances of each Series in accordance with the provisions of
Article III hereof. Distributions to or from the trust shall be as directed
from time to time by the Fund.
III. Management Provisions: The Trustee shall invest as it deems appropriate in
any one or more money market demand accounts of the Bank or of any other bank,
provided the accounts are fully insured by the FDIC and any excess above the
insurance limit is collateralized by securities in accordance with Regulation
9.10(b) of the Comptroller of the Currency, 12 CFR 9.10 (b).
IV. Accounting: The Trustee will send the Fund statements at least monthly
showing the transactions in the trust. The Fund must report any errors to the
Trustee, including the non-receipt of a statement, within 90 days after the
Fund normally receives a statement. Otherwise, the Fund, at the Trustee's
discretion, may be deemed to have accepted the transactions as stated.
V. Provisions Regarding the Trustee:
A. The "Authorized Person" to act for the Fund and the methods of
properly acting for the Fund under this Agreement shall be the same as
specified in the Custodian Agreement, as that may be amended from time to
time;
B. The fact that the Bank is Trustee and in such capacity deposits trust
assets in banking accounts of the Bank shall no be deemed a conflict of
interest. The Bank may receive its usual charges or profits for that service;
and
C. The Trustee may resign upon 120 days' notice to the Fund; Settlor may
terminate this Agreement at any time. Immediately upon termination the Trustee
shall pay all trust assets held hereunder to the Successor Custodian or the Fund
in accordance with Paragraph 24 of the Custodian Agreement.
VI. Situs and Governing Law: The situs of this Trust shall be in
Pennsylvania, and all questions as to the construction, validity, effect or
administration of this trust shall be governed by Pennsylvania law.
VII. Rights Reserved: The Fund reserves the right to revoke this trust by
writing delivered to the Trustee and to amend this trust with the Trustee's
approval.
<TABLE>
<CAPTION>
<S> <C>
Signed _____________________, 1996
ATTEST: AETNA VARIABLE PORTFOLIOS, INC.
__________________________________ By:_________________________________
</TABLE>
The foregoing trust was delivered, and is hereby accepted in Pennsylvania on
__________________, 1996.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: MELLON BANK, N.A.
__________________________________ By:_________________________________
</TABLE>
BALLARD SPAHR ANDREWS & INGERSOLL
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7599
TELEPHONE 215-665-8500
FAX 215-864-8999
MEMORANDUM
October 27, 1992
To: Martin T. Conroy (ALIAC)
Donna M. Owens (Mellon Bank)
From: Laura Anne Corsell (Ballard Spahr)
Re: Aetna Life Insurance and Annuity Company
Aetna Series Fund, Inc.
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Income Shares
Aetna Guaranteed Equity Trust
Aetna Variable Fund
The purpose of this memorandum is to clarify certain technical items which
appear in the text of the recently executed custodian agreements ("Agreements")
between Mellon Bank, N.A. and Aetna Life Insurance and Annuity Company ("ALIAC")
and the various mutual funds for which ALIAC serves as investment adviser
("ALIAC Funds"), respectively. In addition, enclosed is a corrected first page
for each of those Agreements relating to the ALIAC Funds to reflect the correct
name of the adviser.
1. The words "cash", "monies" and "moneys" are used interchangeably in the
Agreements and refer to all uninvested funds (in the form of either currency or
checks) but do not include funds represented by cash equivalents such as
repurchase agreements, certificates of deposit, treasury bills or notes and the
like.
2. The term "Shares" as used in those Agreements relating to the ALIAC
Funds refers to "units of beneficial interest" in the case of those mutual funds
that are organized as Massachusetts business trusts and "shares of common stock"
in the case of those mutual funds organized as Maryland corporations.
Similarly, the term "Board of Directors" as used in such agreements
encompasses the Board of Trustees in those cases where the relevant mutual fund
is organized as a Massachusetts business trust.
3. The transactions referred to in paragraphs 10, 13 and 14 may be
authorized either by Written Instructions or Oral Instructions. In accordance
with paragraph 8(b), all Oral Instructions must be confirmed by Written
Instructions.
4. With respect to the Agreements relating to Aetna Income Shares, Aetna
Variable Fund, Aetna Guaranteed Equity Trust and Aetna Variable Encore Fund,
the term "Trust Agreement" as used in paragraph 26 refers to the Declaration
of Trust of each such mutual fund and does not refer in any way to the trust
arrangement evidenced by Exhibit A to each such agreement.
As noted above, the foregoing items are intended to clarify the text of the
Agreements as executed and do not change the substance of the various
Agreements. Please file a copy of this memorandum with each of the Agreements,
as executed.
cc(w/encls.): George Gingold, Esq.
Ms. Pat Rup
Institutional Trust Services Group Mellon Bank
- --------------------------------------------------------------------------
MELLON BANK DOMESTIC FEE SCHEDULE
Account Fee:
$500 per account, per year.
Asset Fee:
Domestic Assets - 1/6 Basis Point (0.0000166) on all assets
Euroclear Assets - 1.4 Basis Points (0.00014) on all assets
Transaction Fees:
$7 per book entry transaction (purchase - sale - maturity) $15 per physical
transaction (purchase - sale - maturity) $25 per Euroclear transaction
(purchase - sale - maturity) $50 per option and future transaction (open -
close)
The foregoing fee schedule shall remain in effect for not less than three years
from the effective date of the Custodian Agreement between the fund and Mellon
Bank, N. A.
Mellon Bank, N.A.
Aetna GET Fund
AMENDMENT TO CUSTODIAN AGREEMENT
between
AETNA GET FUND
and
MELLON BANK, N.A.
WITNESSETH:
WHEREAS, Aetna GET Fund (the "Fund"), formerly named Aetna Guaranteed Equity
Trust, and Mellon Bank, N.A. ("Mellon"), are parties to a Custodian Agreement
(the "Agreement") dated September 1, 1992, as amended, with respect to the
assets of the Fund's Series A and some or all additional series that the Fund
may establish from time to time (individually a "Portfolio," and collectively,
the "Portfolios");
WHEREAS, the Fund has authorized the creation of a new series portfolio, Series
C, and has amended its registration statement on Form N-1A to register shares of
beneficial interest of Series C with the Securities and Exchange Commission;
WHEREAS, the Fund desires to appoint Mellon as custodian of the assets of its
Series C;
NOW THEREFORE, it is agreed as follows:
1. The Fund, on behalf of Series C, hereby appoints Mellon, and Mellon
hereby accepts appointment, as the custodian of the assets of Series C, in
accordance with all the terms and conditions set forth in the Agreement.
2. The Fund is entering into the Agreement on behalf of Series C
individually, and not jointly with any other Portfolio. In the Agreement, the
term "Fund" shall refer to the Fund solely on behalf of each Portfolio
individually to which a particular Futures Contract transaction or other
obligation under the Agreements relates. The responsibilities and benefits set
forth in the Agreements shall refer to each Portfolio severally and not jointly.
No individual Portfolio shall have any responsibility for any obligation arising
out of a Futures Contract transaction entered into by any other Portfolio.
Without otherwise limiting the generality of the foregoing,
(a) any breach of the Agreement regarding the Fund with respect to any
one Portfolio shall not create a right or obligation with respect to any other
Portfolio;
(b) under no circumstances shall the Bank have the right to set off
claims relating to a Portfolio by applying property of any other Portfolio;
(c) no Portfolio shall have the right of set off against the assets
held by any other Portfolio;
(d) the business and contractual relationships created by the
Agreement as amended hereby, and the consequences of such relationships relate
solely to the particular Portfolio to which such relationship was created; and
(e) all property held by the Bank on behalf of a particular Portfolio
shall relate solely to the particular Portfolio.
3. The Fund and Mellon agree that the Trustees, officers, employees and
agents of the Fund and the shareholders of any of its funds shall not personally
be bound by or liable under this Agreement, as provided in the Fund's
Declaration of Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Fund [and the shareholders of Series C] and
executed and delivered by an authorized officer of the Fund, acting as such, and
neither such authorization nor such execution and delivery shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their officers designated below on the date mentioned below.
<TABLE>
<CAPTION>
<S> <C>
Aetna GET Fund, on behalf of
Mellon Bank, N.A. Series C, individually
By: By:
Name: Name:
Title: Title:
Date: Date:
</TABLE>
FORM OF
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made by and between AETNA LIFE INSURANCE AND ANNUITY COMPANY,
a Connecticut corporation (the "Administrator") and AETNA GET FUND, a
Massachusetts business trust (the "Fund"), on behalf of its Series C ("Series"),
as of the date set forth below the parties' signatures.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund has established the Series; and
WHEREAS, the Administrator is registered with the Commission as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act") and has entered into an agreement with the Fund to serve as investment
adviser to the Fund; and
WHEREAS, the Fund desires that the Administrator provide certain administrative
services for the Fund in connection with the operation and management of the
Fund;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT OF THE ADMINISTRATOR
Subject to the terms and conditions of this Agreement and the policies and
control of the Fund's Board of Trustees (the "Board"), the Fund hereby appoints
the Administrator to provide the administrative services and assume the
obligations described below, for the compensation set forth in Section VI. The
Administrator agrees that, except as required to carry out its duties under this
Agreement or otherwise expressly authorized, it is acting as an independent
contractor and not as an agent of the Fund and has no authority to act for or
represent the Fund in any way.
II. DUTIES OF THE ADMINISTRATOR
A. Services
The Administrator agrees to use its best judgment, efforts and facilities
in providing services to the Fund and in connection therewith, it agrees that
those administrative services will consist of:
1. providing office space, equipment and facilities (which may be
the Administrator's or its affiliates') for maintaining the Fund's business
organization and for performing administrative services hereunder;
2. supervising and managing all aspects of the Fund's operations (other
than investment advisory activities) including administering relations with, and
monitoring 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;
3. calculating and arranging for the publication of the net asset
value of the Fund;
4. providing noninvestment related statistical and research data and
such other reports, evaluations and information as the Fund or the Board may
request from time to time;
5. providing internal clerical, accounting and legal services, and
stationery and office supplies;
6. preparing, to the extent requested by the Fund, the Fund's
prospectus, statement of additional information, and annual and semi-annual
reports to shareholders;
7. arranging for the printing and mailing (at the Fund's expense) of
proxy statements and other reports or other materials provided to the Fund's
shareholders;
8. preparing for execution and filing all the Fund's federal and
state tax returns and required tax filings other than those required to be
made by the Fund's custodian and transfer agent;
9. preparing periodic reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities with the advice of the
Fund's counsel;
10. maintaining the Fund's existence, and its corporate records and
during such times as the shares of the Fund are publicly offered, maintaining
the registration and qualification of the Fund's shares under federal and
state law;
11. keeping and maintaining the financial accounts and records of
the Fund;
12. developing and implementing, if appropriate, management and
shareholder services designed to enhance the value or convenience of the Fund
as an investment vehicle; and
13. providing the Board on a regular basis with reports and analyses
of the Fund's operations and the operations of comparable investment
companies.
B. Expenses
During the term of this Agreement, the Administrator shall be responsible
for all of its costs and expenses incurred in carrying out the services
described in Paragraph A of this Section. In addition, it agrees that it shall
be responsible for, and pay or reimburse the Fund for, all of the following
expenses that would otherwise by payable by the Fund:
1. fees and expenses of the Fund's independent accountants and legal
counsel;
2. fees and expenses of any transfer agent, custodian, dividend,
accounting, pricing or disbursing agent of the Fund;
3. insurance premiums on property or personnel (including officers
and trustees) of the Fund which benefit the Fund or its trustees;
4. all fees and expenses of the Fund's trustees, who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Adviser;
5. expenses of preparing, printing and distributing prospectuses and
reports to shareholders of the Fund, except for those expenses paid by third
parties in connection with the distribution of Fund shares;
6. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares of the Fund or in
cash;
7. costs and expenses of promoting the sale of shares in the Fund,
including preparing prospectuses and reports to shareholders of the Fund,
provided, nothing in this Agreement shall prevent the charging of such costs to
third parties involved in the distribution and sale of Fund shares;
8. fees payable by the Fund to the Commission or to any state
securities regulator or other regulatory authority for the registration of
shares of the Fund in any state or territory of the United States or in the
District of Columbia;
9. 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;
10. all dues and fees payable to the ICI or successor organization;
and
11. any other ordinary, recurring expenses incurred in the management
of the Fund's assets or administering its affairs.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Administrator
The Administrator hereby represents and warrants to the Fund as follows:
1. Due Incorporation and Organization. The Administrator 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. Best Efforts. The Administrator at all times shall provide its
best judgment and effort to the Fund in carrying out its obligations
hereunder.
B. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Administrator as follows:
1. Due Organization. The Fund has been duly formed as a business
trust under the laws of the Commonwealth of Massachusetts and it is authorized
to enter into this Agreement and carry out its obligations hereunder.
2. Registration. The Fund is registered as an investment company with
the Commission under the 1940 Act and shares of the Fund are registered for
offer and sale to the public under the Securities Act of 1933, as amended (the
"1933 Act") and all applicable state securities laws. Such registrations will be
kept in effect during the term of this Agreement.
IV. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Administrator shall
comply with the following:
A. all applicable provisions of the 1940 Act and any rules and
regulations adopted thereunder;
B. all terms and provisions described in the most current effective
amendment of the registration statement for the Fund, as filed with the
Commission under the 1933 Act and the 1940 Act ("Registration Statement") and
all policies adopted by the Board;
C. the provisions of the Fund's Declaration of Trust, as amended;
D. the Bylaws of the Fund, as amended; and
E. any other applicable provisions of state or federal law, or any rules
or regulations issued by such regulatory authorities.
V. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement may be
furnished by any directors, officers or employees of the Administrator, by any
affiliates of the Administrator under the Administrator's supervision, or by any
party to which such services may lawfully be delegated.
VI. COMPENSATION
For the services to be rendered, the facilities furnished, and the expenses
paid, by the Administrator, the Fund shall pay to the Administrator an annual
fee, at a rate of 0.10% of the average daily net assets of the Fund payable
monthly in arrears. Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily at the rate of 1/365 of 0.10% of
the daily net assets of the Fund. If this Agreement becomes effective subsequent
to the first day of a month or terminates before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above.
VII. NONEXCLUSIVITY
The services of the Administrator to the Fund are not to be deemed to be
exclusive, and the Administrator shall be free to render administrative or other
services to others (including other investment companies) and to engage in other
activities, so long as its services under this Agreement are not impaired
thereby. It is understood and agreed that officers and directors of the
Administrator may serve as officers or trustees of the Fund, and that officers
or trustees of the Fund may serve as officers or directors of the Administrator
to the extent permitted by law; and that the officers and directors of the
Administrator 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 corporation, including
other investment companies.
VIII. TERM
This Agreement shall become effective at the close of business on the date
hereof and shall continue through December 31, 1996. Thereafter it shall
continue for successive annual periods, provided such continuance is
specifically approved at least annually by the Fund's trustees who are not
parties to this Agreement or "interested persons" as defined in the 1940 Act
("disinterested trustees"), or by the vote of the holders of a "majority" as
defined in Section 2(a)(42) of the 1940 Act ("majority") of the outstanding
voting securities of the Fund and by a majority of the disinterested Trustees.
IX. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's trustees or by vote of a majority of the Fund's
outstanding voting securities or by the Administrator, on sixty (60) days'
written notice to the other party.
X. LIABILITY OF ADMINISTRATOR
A. Liability of the Administrator
The Administrator shall be liable to the Fund and shall indemnify the Fund
for any losses incurred by the Fund, whether in the purchase, holding or sale of
any security or otherwise, to the extent that such losses resulted from an act
or omission on the part of the Administrator or its officers, directors or
employees, that is found to involve willful misfeasance, bad faith or
negligence, or reckless disregard by the Administrator of its duties under this
Agreement, in connection with the services rendered by the Administrator
hereunder.
B. Liability of the Fund, the Shareholders and the Trustees
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the trustees of the Fund as trustees
and not individually and that the obligations of this instrument are not binding
upon any of the trustees or shareholders individually but are binding only upon
the assets and property of the Fund. No provision of this Agreement shall be
construed to protect any trustee or officer of the Fund or director or officer
of the Adviser, from liability in violation of Section 17(h) and (i) of the 1940
Act.
XI. 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 the following addresses:
if to the Fund or the Administrator:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attention: Secretary
XII. 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, regulations or orders
of the Commission issued pursuant to said Act. In addition, where the effect of
a requirement of the 1940 Act reflected in the provisions of this Agreement is
revised by rule, regulation or order of the Commission, such provisions shall be
deemed to incorporate the effect of such rule, regulation or order.
XIII. SERVICE MARK
The service mark of the Fund and the name "Aetna" have been adopted by the Fund
with the permission of Aetna Life and Casualty Company and their continued use
is subject to the right of Aetna Life and Casualty Company to withdraw this
permission in the event the Administrator or another subsidiary or affiliated
corporation of Aetna Life and Casualty Company should not be the administrator
of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the ____ day of __________________,
1996.
<TABLE>
<CAPTION>
<S> <C>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Attest:
By:
Name:
________________________ Title:
AETNA GET FUND, on behalf of its Series C
Attest:
By:
Name:
________________________ Title:
</TABLE>
LICENSE AGREEMENT
This Agreement, made at Hartford, Connecticut, this 14th day of July, 1987 by
and between Aetna Life and Casualty Company, a Connecticut corporation with a
principal place of business at 151 Farmington Avenue, Hartford, Connecticut
(hereinafter called "Licensor") and Aetna Guaranteed Equity Trust, a
Massachusetts business trust, (hereinafter called "Licensee").
WITNESSETH:
WHEREAS, Licensor either directly or by its affiliated companies has adopted and
is using and is the owner of the service mark and registration thereof listed on
Schedule A attached hereto and made a party hereof (hereinafter referred to
collectively as the "Licensed Service Mark"), which service mark has become
valuable and important in identifying the high quality of services rendered
under the said mark by the Licensor, and
WHEREAS, Licensee is a related company of Licensor by virtue of the management
of the assets of Licensee by Aetna Life Insurance and Annuity Company, a
wholly-owned subsidiary of Licensor; and
WHEREAS, the parties deem it in the interest of each, and it is the intention
and desire of the parties, that Licensee be permitted to use the Licensed
Service Mark as identifying the services of Licensee specified hereinafter and
that it be permitted to use the name of "Aetna" as a part of its name; and
WHEREAS, both parties recognize the desire to maintain and preserve the validity
and integrity of the Licensed Service Mark forming the subject matter of this
Agreement,
NOW, THEREFORE, for good and valuable consideration, the receipt whereof is
hereby acknowledged, and in consideration and of their mutual promises and
undertakings, the parties hereto agree as follows:
1. Licensor grants to Licensee and Licensee accepts a nonexclusive license
to use the Licensed Service Mark throughout the United States and Canada in
connection with and for identifying the investment facilities provided by
Licensee.
2. The license granted in paragraph 1 hereof includes the grant of
permission to Licensee to use the name "Aetna" as a part of its name.
3. No right is granted to Licensee to use any other service mark of
Licensor not now or hereafter listed in Schedule A hereof.
4. Licensor shall have the right to control the nature and quality of the
services performed by Licensee under the Licensed Service Mark and Licensee
agrees to maintain the same high quality of services as are maintained by
Licensor and that it will conform to the performance standards established by
Licensor. Licensee shall submit to Licensor such evidence as Licensor may
reasonably require to insure Licensee's compliance with its obligations set
forth herein.
5. It is expressly stipulated that the use of the Licensed Service Mark by
Licensee shall inure to the benefit of Licensor and any registration of said
name covering the services performed by Licensee under this license shall
be registered in the name of Licensor, it being understood that the present
license will not in any way affect the ownership by Licensor of the Licensed
Service Mark which shall continue to be the exclusive property of Licensor.
Licensee shall not at any time do or cause to be done any act contesting or in
any way impairing or tending to impair Licensor's entire right, title and
interest in the Licensed Service Mark and the registration thereof.
6. Licensor shall have the right to control the form and manner in which
the Licensed Service Mark is used by Licensee upon or in connection with
advertisements, brochures or other printed material used in the sale or
advertising of Licensee's shares and Licensee agrees, upon request of Licensor,
to furnish Licensor with specimens of all such advertisements, brochures or
other printed material used by Licensee and that it will discontinue the use of
any such advertisements, brochures or other printed material which is not or
ceases to be approved by Licensor.
7. The consideration for the grant of this license shall be fixed at the
rate of One Dollar per year, Licensee to make payments annually.
8. Licensee shall not be deemed by virtue of this Agreement to be the agent
or legal representative of Licensor and shall not by virtue of this Agreement
have the right or authority to pledge the credit of or incur, any obligation,
expressed or implied, on behalf of Licensor.
9. The right to institute and prosecute suits for infringement of the
Licensed Service Mark is reserved exclusively to Licensor, and Licensor shall
have the right to join Licensee in any such suit as a formal party. Licensee
agrees to assist Licensor to the best of its ability and at Licensor's expense
in any such suit brought by Licensor. It is understood, however, that Licensor
is not obligated to institute and prosecute any such suits in any case in which
it, in its sole judgment, may consider it inadvisable to do so.
10. Unless sooner terminated as hereinafter provided, this Agreement shall
continue in full force and effect for a period of one (1) year from its
effective date and shall be automatically renewed thereafter from year to year.
Licensor shall have the unrestricted right to cancel this Agreement at any time
upon written notice to Licensee.
11. This Agreement shall automatically terminate in the event that:
a) Licensee does not comply with any provisions of this Agreement and
the breach is not remedied within twenty (20) days of written request thereof
from Licensor.
b) Licensor ceases to manage, directly or indirectly, the assets of
Licensee.
c) Licensee is dissolved, or a petition of bankruptcy is filed against
it, or if Licensee is placed in the hands of a receiver or otherwise enter into
any scheme or composition with creditors, or makes an unauthorized assignment
for the benefit of creditors.
12. Neither this Agreement nor any rights hereunder may be assigned or
otherwise transferred by Licensee nor shall they inure to the benefit of any
trustee in bankruptcy, receiver or successor of Licensee, whether by operation
of law or otherwise without the written consent of Licensor, and any assignment
or transfer without such consent shall be null and void.
13. Upon termination of this Agreement, Licensee shall immediately
discontinue all use of the Licensed Service Mark and shall not thereafter use
any Mark which is similar or likely to cause confusion therewith.
14. This Agreement supersedes all other agreements between Licensor and
Licensee with respect to the use of the Licensed Service Mark.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
<TABLE>
<CAPTION>
<S> <C>
AETNA LIFE AND CASUALTY COMPANY
Attest:
By:
________________________ Title: Corporate Secretary
Paige Falasco
Assistant Corporate Secretary
AETNA GUARANTEED EQUITY TRUST
Attest:
By:
________________________ Title: Secretary
Paige Falasco
Assistant Secretary
</TABLE>
SCHEDULE A
The following service mark and registrations are hereby licensed by Licensor to
Licensee in accordance with the terms of the Agreement dated July 14, 1987 by
and between Aetna Life and Casualty Company (Licensor) and Aetna Guaranteed
Equity Trust (Licensee).
1. Service Mark:
Aetna logo - block design, without legend.
2. Registration:
Reg. No. 822,577, Class 102, issued January 17, 1967 in the United
States Patent Office.
June 14, 1996
Board of Trustees
Aetna GET Fund
151 Farmington Avenue
Hartford, CT 06156-8962
Re: Opinion of Counsel - Aetna GET Fund
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-1A with respect to the Aetna GET Fund.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
We are of the following opinions:
1. Aetna GET Fund ("Fund") is a valid and existing unincorporated
voluntary association, commonly known as a business trust.
2. The Fund is a business Trust created and validly existing pursuant
to the Massachusetts Laws.
3. All of the prescribed Fund procedures for the issuance of the shares
have been followed, and, when such shares are issued in accordance with the
Prospectus contained in the Registration Statement for such shares, all state
requirements relating to such Fund shares will have been complied with.
4. Upon the acceptance of purchase payments made by shareholders in
accordance with the Prospectus contained in the Registration Statement and
upon compliance with applicable law, such shareholders will have
legally-issued, fully paid, non-assessable shares of the Fund.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/ RAYMOND A. O'HARA III
-----------------------------
Raymond A. O'Hara III
SCHEDULE FOR CALCULATION OF PERFORMANCE DATA
GET A SERIES
1. TOTAL RETURN CALCULATION
ONE YEAR PERIOD ENDED NOVEMBER 30, 1992
n
Formula P (1 + T) = ERV
Initial Investment 16,659.37 = P
Ending Redeemable Value 18,505.54 = ERV
One Year Period Ended 11/30/92 1.00 = n
TOTAL RETURN FOR THE PERIOD 11.08% = T
2. TOTAL RETURN CALCULATION
FIVE YEAR PERIOD ENDED NOVEMBER 30, 1992
n
Formula P (1 + T) = ERV
Initial Investment 10,106.83 = P
Ending Redeemable Value 18,505.54 = ERV
Five Year Period Ended 11/30/92 5.00 = n
TOTAL RETURN FOR THE PERIOD 12.86% = T
3. TOTAL RETURN CALCULATION
INCEPTION THROUGH NOVEMBER 30, 1992
n
Formula P (1 + T) = ERV
Initial Investment 10,000.00 = P
Ending Redeemable Value 18,505.54 = ERV
Inception* through 11/30/92 5.42 = n *Inception includes
the Offering Period
TOTAL RETURN FOR THE PERIOD 13.10% = T
GET B SERIES
TOTAL RETURN CALCULATION
ONE YEAR PERIOD ENDED JUNE 30, 1995
n
Formula P (1 + T) = ERV
Net Asset Value 11.36
Initial Investment 11,415.75 = P
Ending Redeemable Value 14,379.25 = ERV
One Year Period Ended 6/30/95 1.00 = n
TOTAL RETURN FOR THE PERIOD 25.97 = T
TOTAL RETURN CALCULATION
INCEPTION THROUGH MAY 31, 1996
n
Formula P (1 + T) = ERV
Net Asset Value 13.64
Initial Investment 10,000.00 = P
Ending Redeemable Value 14,379.25 = ERV
Inception through 5/31/96 1.92 = n
TOTAL RETURN FOR THE PERIOD 20.85 = T
