SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Aetna Generation Portfolios, Inc.
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(Name of Registrant as Specified In Its Charter)
Registrant
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement N0.:
File Nos. 33-88334, 811-8934
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3) Filing Party:
by Freedman, Levy, Kroll & Simonds
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4) Date Filed:
April 11, 1996
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<PAGE>
May 10, 1996
Dear Fellow Shareholders and Contractholders,
You are cordially invited by the Directors of Aetna Generation Portfolios,
Inc. (the "Fund"), on behalf of each of the Fund's investment portfolios
(individually, a "Portfolio" and collectively, the "Generation Portfolios")
to attend a Special Meeting of Shareholders on June 17, 1996 at 9:00 a.m. to
consider several recommendations which are important to you and your Fund.
Each of the matters to be voted at this meeting is reviewed in detail in
the enclosed Notice and Proxy Statement, including (i) election of Directors,
(ii) a new advisory agreement for each Portfolio with a change in investment
advisory fee paid by each Portfolio and (iii) a new subadvisory arrangement
for each Portfolio. The latter two recommendations are of particular
importance to you.
Over the past several years, the Aetna organization has conducted a
thorough, strategic review of its investment operations with the objective of
significantly modernizing and enhancing its capabilities. This review
included an analysis of resources, pricing strategies and organizational
structure in comparison to competitive practice and customer/market
requirements. Significant enhancements have been made to date as a result of
this study and this Special Meeting is to authorize further significant steps
in this regard.
As part of these enhancements, a number of highly qualified and
experienced investment professionals with a breadth of different technical
expertise have been hired to manage your Portfolio under a new
market-competitive compensation program. New quantitative research and
analytical tools have been designed and implemented along with significant
upgrades in data bases, information management and reporting systems to
improve the depth of analysis capabilities, reduce risk and create quicker
response time in volatile markets.
After a comprehensive review of the (i) resources required to effectively
manage your Portfolio, (ii) the enhanced services provided by Aetna to the
Generation Portfolios, and (iii) an in-depth analysis of competitive advisory
fees, the Directors are recommending an increase in the management fees paid
by the Generation Portfolios. The Directors believe the new advisory contract
is fair to you, your Portfolio, and Aetna and will assure for the future that
essential financial resources are available to provide products responsive to
market demands and competitive, high quality advisory services in
increasingly complex financial markets.
Please note that, in conjunction with this proposal, the Directors have
approved a change to the Administrative Services Agreement between Aetna and
each Portfolio, which sets a fixed fee to be paid to Aetna for each
Portfolio's administrative costs. Under this new agreement, on an annualized
basis, the total expenses of each Portfolio would be less than those charged
in 1995.
To further enhance the depth and quality of its investment advisory
capabilities and better position itself competitively, the Aetna organization
has decided to establish a single stand-alone investment management
subsidiary to focus its advisory activities. As part of this strategic
initiative, Aetna will combine its investment management operations ($22
billion of assets under management) with another Aetna affiliate, Aeltus
Investment Management, Inc. ("Aeltus") which currently manages approximately
$11 billion of total assets primarily for pension account clients. The
combined entity will be called Aeltus, and it is proposed that Aeltus be
appointed as sub-advisor to each Portfolio. This business structure is used
by a number of investment providers in today's marketplace.
Aeltus will bring to the combined entity more depth of personnel,
additional effective styles of investment management and enhanced research
and quantitative modeling capability. Further, through the combined larger
entity, each Portfolio will benefit from such things as an enhanced ability
to execute securities transactions.
<PAGE>
The Directors have carefully considered this combination of Aetna and Aeltus
investment management operations and unanimously recommend that you approve the
sub-advisory agreement with Aeltus. The Directors believe that the establishment
of a focused, stand-alone investment management entity is in the best long-term
interest of your Fund and each of its Portfolios.
Your participation in this process is very important. If your contract is
held in Aetna's Separate Account D, Aetna has no authority to vote shares
attributable to your contract. Therefore, if Aetna does not receive any
instructions from you, Aetna will abstain from voting these shares. If you
cannot attend the meeting, you can vote by filing out the enclosed
authorization card in the postage prepaid envelope provided. Please complete,
sign, and return the enclosed card so that your shares will be represented.
If you later decide to attend the meeting, you may revoke your proxy at that
time and vote your shares in person.
If you have any questions related to the Special Meeting and/or this proxy
statement, please call us at 1-800-632-2386.
Sincerely,
/s/ Shaun P. Mathews
Shaun P. Mathews
President
May 10, 1996
<PAGE>
May 10, 1996
NOTICE OF SPECIAL MEETING
of the Shareholders of
AETNA GENERATION PORTFOLIOS, INC.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
A Special Meeting of the Shareholders of Aetna Generation Portfolios, Inc.
(the "Fund"), including each of its investment portfolios (individually, a
"Portfolio" and collectively, the "Generation Portfolios"), will be held on
June 17, 1996, at 9:00 a.m., Eastern time, at 151 Farmington Avenue,
Hartford, Connecticut 06156-8962 for the following purposes:
1. to elect nine Directors to serve until their successors are elected and
qualified;
2. to approve or disapprove a separate Subadvisory Agreement for each
Portfolio, by and among the Fund, on behalf of each Portfolio, Aetna
Life Insurance and Annuity Company ("Aetna") and its affiliate, Aeltus
Investment Management, Inc.;
3. to approve or disapprove a new separate Investment Advisory Agreement
for each Portfolio, by and between the Fund, on behalf of each
Portfolio, and Aetna, the Fund's current investment adviser;
4. to transact such other business as may properly come before the meeting
and any adjournments thereof.
Shareholders of record at the close of business on April 30, 1996 are
entitled to notice of and to vote at the meeting.
/s/ Susan E. Bryant
Susan E. Bryant
Secretary
<PAGE>
PROXY STATEMENT
May 10, 1996
This Proxy Statement is given to you to provide information you should
review before voting on the matters listed on the Notice of Special Meeting
on the previous page. Your vote is being solicited by the Board of Directors
(the "Directors") of Aetna Generation Portfolios, Inc. (the "Fund"), on
behalf of each of its investment portfolios (individually, a "Portfolio" and
collectively, the "Generation Portfolios"), for a special meeting of
shareholders to be held on June 17, 1996, and, if the meeting is adjourned,
at any adjournment of that meeting, for the purposes listed on the Notice.
This Statement describes the matters that will be voted on at the meeting.
The solicitation of votes is made by the mailing of this Statement and the
accompanying Proxy or authorization card on or about May 10, 1996. Aetna Life
Insurance and Annuity Company ("Aetna") and its affiliates may contact
contract holders and their representatives directly commencing in April 1996
to discuss the proposals described in this Statement. The expenses in
connection with preparing this Statement and its enclosures and of all
solicitations will be paid by Aetna, the Fund's investment adviser.
A copy of the Fund's Annual Report for the fiscal year ended December 31,
1995, was mailed to shareholders on or about February 29, 1996. The Annual
Report is available upon request, without charge, to anyone entitled to vote.
If you did not receive an Annual Report, you may request one by writing to
Wayne Baltzer, c/o Aetna, RT2A, 151 Farmington Avenue, Hartford, Connecticut,
06156-8962, or by calling 1-800-632-2386.
Shareholders of record on April 30, 1996, the record date, are entitled to
be present and to vote at the meeting or any adjourned meeting. As of the
record date, Aetna was the record shareholder of 1,699,671.838 shares (100%
of the outstanding shares) of the Aetna Ascent Variable Portfolio,
1,675,271.308 shares (100% of the outstanding shares) of the Aetna Crossroads
Variable Portfolio, and 1,515,375.064 shares (100% of the outstanding shares)
of the Aetna Legacy Variable Portfolio. These shares were owned by Aetna
directly and by Aetna as depositor for its variable annuity contracts (the
"Contracts") issued to you or to a group of which you are a part. Under the
terms of the Contracts you have the right to instruct Aetna how to vote the
shares related to your interest through your Contract.
The shares of each Portfolio held by Aetna are as follows:
Aetna Ascent Variable Portfolio
Aetna Variable Annuity Account B-- 89,996.784 shares (5.29%)
Aetna Variable Annuity Account C-- 711,430.490 shares (41.86%)
Aetna Variable Annuity Account D-- 511,134.815 shares (30.07%)
Direct Investment-- 387,109.749 shares (22.78%)
Aetna Crossroads Variable Portfolio
Aetna Variable Annuity Account B-- 127,137.426 shares (7.59%)
Aetna Variable Annuity Account C-- 597,627.689 shares (35.67%)
Aetna Variable Annuity Account D-- 699,447.004 shares (41.75%)
Direct Investment-- 251,059.189 shares (14.99%)
Aetna Legacy Variable Portfolio
Aetna Variable Annuity Account B-- 173,551.696 shares (11.45%)
Aetna Variable Annuity Account C-- 348,673.831 shares (23.01%)
Aetna Variable Annuity Account D-- 818,202.913 shares (53.99%)
Direct Investment-- 174,946.624 shares (11.55%)
<PAGE>
Aetna will vote the shares of the Generation Portfolios held in its name
as directed. The group Contract holder of some group Contracts has the right
to direct the vote for all shares under the Contract, for, against or
abstaining, in the same proportions as shares for which instructions have
been given under the same Contract. If Aetna does not receive voting
instructions for all of the shares held under Contracts, Aetna will vote all
the shares in all the listed Accounts, except Account D, for, against or
abstaining, in the same proportions as the shares for which they have
received instructions. Aetna will only vote shares of the Generation
Portfolios held through Aetna's Variable Annuity Account D for which it
receives instructions and will not vote shares for which no instructions are
received. All shares held directly by Aetna will be voted in the same
proportions as those voted for the Separate Accounts.
All shares voted at the meeting will be counted as present at the meeting
whether they vote for, against or abstain on the Proposals. More than 50% of
the total outstanding shares of the Fund must be present at the meeting to
have a quorum to conduct business. Proposal 2 (Approval of a Subadvisory
Agreement) and Proposal 3 (Approval of a new Investment Advisory Agreement)
require the vote of a "majority of the outstanding voting securities" of the
applicable Portfolio to be approved. The remaining proposals require approval
by the vote of a simple majority of Fund shares present at the meeting. A
"majority of the outstanding voting securities" of a Portfolio means 67% of
the shares of the Portfolio present at the meeting, assuming a majority of
the shares are present; or, more than 50% of all the outstanding voting
securities of the Portfolio, if less. A vote to abstain is effectively a
negative vote since the proposals require an affirmative vote to be approved.
In the event that a quorum of shareholders is not represented at the
meeting, the meeting may be adjourned until a quorum exists, or, even if a
quorum is represented, the meeting may be adjourned until sufficient votes to
approve any of the proposals are received. The persons named as proxies may
propose and vote for one or more adjournments of the meeting. Adjourned
meetings must be held within a reasonable time after the date originally set
for the meeting (but not more than 6 months after the date of this
Statement). Solicitation of votes may continue to be made without any
obligation to provide any additional notice of the adjournment. The persons
named as proxies will vote shares in favor of an adjournment at their
discretion whether instructions for those shares are to vote for, against or
to abstain from voting on any of the proposals to be considered at the
meeting.
The number of shares that you may vote are shown on the authorization card
accompanying this Statement. The number of shares which you are entitled to
vote is calculated according to the formula described in the materials
relating to your Contract. Votes may be revoked by written notice to Aetna
prior to the meeting or by attending the meeting in person and indicating
that you want to vote your shares.
2
<PAGE>
The duly appointed proxies or authorized persons may, at their discretion,
vote upon any other matters that are raised at the meeting or any
adjournments. Additional matters would only include matters that were not
expected at the date of this Statement.
MATTERS TO BE ACTED UPON
PROPOSAL 1
ELECTION OF DIRECTORS
The persons listed in the table below are nominated to serve as Directors
of the Fund until their successors are elected and qualified. The Nominees
consent to being named in this proposal. The Nominees currently serve as
Directors and will continue to serve if reelected by the shareholders. Once
elected, the Directors continue to serve indefinitely.
<TABLE>
<CAPTION>
Principal Occupation,
Name, Age and Employment or Public First
Position Directorships During Became
with the Fund Last Five Years a Director
-------------------- ------------------------------------------- -----------
<S> <C> <C>
Morton Ehrlich* Chairman and Chief Executive Officer, 1994
61 years of age Integrated Management Corp. and Universal
Director Research Technologies (since January 1992);
President, LIFECO Travel Services Corp.
(from October 1988 to December 1991).
Maria T. Fighetti* Attorney, New York City Department of 1994
52 years of age Mental Health (since 1973).
Director
David L. Grove* Private Investor, Economic/ Financial 1994
77 years of age Consultant (since December 1988).
Director
Timothy A. Holt Director, Senior Vice President and Chief 1996
43 years of age Financial Officer, Aetna (since February
Director 1996); Vice President, Portfolio
Management/ Investment Group, Aetna Life
and Casualty Company (from August 1991 to
February 1996); Treasurer, Aeltus, formerly
Aetna Capital Management Company, Inc.
(from February 1990 to July 1991); Vice
President-Finance and Treasurer, Aetna Life
and Casualty Company (from August 1989 to
July 1991).
Daniel P. Kearney Chairman (since February 1996), Director 1994
56 years of age (since March 1991) and President (since
Director March 1994), Aetna; Executive Vice
President (since December 1993), and Group
Executive, Investment Division (from
February 1991 to December 1993), Aetna Life
and Casualty Company.
3
<PAGE>
Principal Occupation,
Name, Age and Employment or Public First
Position Directorships During Became
with the Fund Last Five Years a Director
-------------------- ------------------------------------------- -----------
Sidney Koch* Senior Adviser, Hambro America, Inc. (since 1994
60 years of age January 1993); Senior Adviser, Daiwa
Director Securities America, Inc. (from 1991 to
January 1993); Executive Vice President,
Daiwa Securities America, Inc. (from 1986
to January 1991).
Shaun P. Mathews Vice President and Director, Aetna (since 1994
40 years of age March 1991); Assistant Vice President,
Director and Aetna Life and Casualty Company (from July
President 1989 to March 1991).
Corine T. Norgaard** Dean, School of Management, State 1994
58 years of age University at New York (Binghamton) (since
Director August 1993); Professor, accounting,
University of Connecticut (from September
1969 to June 1993); Director, The Advest
Group, Inc. (holding company for brokerage
firm) (since August 1983).
Richard G. Scheide* Private banking consultant (since July 1994
66 years of age 1992); Consultant, Fleet Bank (from July
Director 1991 to July 1992); Executive Vice
President and Manager, Trust and Private
Banking, Bank of New England, N.A. and Bank
of New England Company (from June 1976 to
July 1991).
</TABLE>
* These Directors (the "Independent Directors") are not interested persons
as defined by the Investment Company Act of 1940 ("1940 Act") and the
related rules of the Securities and Exchange Commission ("Commission").
** Dr. Norgaard is a director of a holding company that has as a subsidiary a
broker-dealer that sells Contracts for Aetna. The Fund is offered as an
investment option under the Contracts. Her position as a director of the
holding company may cause her to be an "interested person" for purposes of
the 1940 Act.
The business address of each Nominee is 151 Farmington Avenue, Hartford,
Connecticut 06156. The Fund held four meetings during 1995 all of which were
in person. Mr. Kearney was unable to attend any of the board meetings in
1995. All other Directors attended all meetings.
Each Nominee is currently a director or trustee of each of the following
management investment companies managed by Aetna: Aetna Series Fund, Inc.,
Aetna Income Shares; Aetna Variable Encore Fund; Aetna Investment Advisers
Fund, Inc.; Aetna Variable Fund; and Aetna GET Fund (collectively with the
Fund, the "Fund Complex").
As of April 30, 1996, Directors and officers of the Fund beneficially
owned less than 1% of each Portfolio's outstanding shares.
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<PAGE>
Remuneration of Officers and Directors
None of the Fund's officers nor any Directors who are employees of Aetna
are entitled to any compensation from the Fund. During 1995, the following
Directors earned the following for their services as Directors to the Fund
and the Fund Complex:
<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation From Fund Complex
From Fund Paid to Directors
----------- ---------------------
<S> <C> <C>
Morton Ehrlich $ 1,324 $ 46,000
Maria T. Fighetti $ 1,324 $ 46,000
David L. Grove* $ 1,324 $ 46,500
Sidney Koch $ 1,324 $ 47,000
Corine T. Norgaard $ 1,344 $ 51,000
Richard G. Scheide $ 1,324 $ 46,500
----------- ---------------------
Total $ 7,964 $283,000
=========== =====================
</TABLE>
* Mr. Grove elected to defer all compensation.
Committees
The Directors have standing Audit, Contract Review and Pricing Committees.
The Contract Review and Audit Committees include all the Directors who are
not employees of Aetna. Dr. Norgaard is the Chairperson of the Audit
Committee and Mr. Koch is the Chairperson of the Contract Review Committee.
The Audit Committee reviews the relationship between the Fund and its
independent public accountants. The Contract Review Committee reviews the
Fund's investment advisory, subadvisory and administrative services contracts
at least annually in connection with considering the continuation of those
contracts. That Committee also meets any time there is a proposal to amend
any of those agreements. The Fund's Pricing Committee consists of Mr. Mathews
(Chairperson), Mr. Koch, Dr. Norgaard, and Mr. Scheide. The Pricing Committee
is responsible for acting upon and approving the Fund's net asset value at
times of market disruption or in any situation where the range of possible
valuations of individual securities could cause the net asset value of the
Fund's shares to vary by one cent or more per share. In 1995, the Audit
Committee met two times, the Contract Review Committee met two times, and the
Pricing Committee met once. All members of these committees attended all the
committee meetings. The Board of Directors does not have a standing
nominating committee for the Fund nor a standing compensation committee.
PROPOSAL 2
APPROVAL OF A SUBADVISORY AGREEMENT
The Independent Directors have unanimously approved, and recommend that
the shareholders of each Portfolio approve, a subadvisory agreement for each
Portfolio (the "Subadvisory Agreement"), by and among Aetna, the Fund, on
behalf of each Portfolio, and Aetna's affiliate, Aeltus Investment
Management, Inc. ("Aeltus"). The Subadvisory Agreements for each Portfolio
are identical in all material respects, and a copy of the form of Subadvisory
Agreement to be entered into separately by the Fund for each Portfolio is
included with this Statement as Exhibit A.
Why is Aetna proposing a Subadvisory arrangement?
As part of a strategic review of its investment operations, the Aetna
organization performed an in-depth analysis of various organizational
structures. It has concluded that it should combine its investment advisory
businesses into a single stand-alone investment management subsidiary. From
an operating perspective, this is intended primarily as a
5
<PAGE>
corporate restructuring. To accomplish this goal, Aetna would combine its
investment management operations with those of Aetna's affiliate, Aeltus. The
combined entity would be a separate corporate entity managing over $33
billion in assets and would operate under the name Aeltus. This type of
business structure is used by a number of investment providers in today's
marketplace and is consistent with maintaining a focused, well-qualified and
fully integrated investment capability. Complementing the significant
investments and enhancements Aetna has made to its advisory capabilities over
the last two years, Aeltus would add more depth of personnel, different
styles of investment management and additional research and quantitative
modeling capability. Your Fund and each of its Portfolios would benefit from
this larger investment advisory entity in such ways as more efficient
execution of securities transactions.
What is being proposed?
To accomplish the combination, the investment personnel and staff of Aetna
would be transferred to Aeltus. Aetna and each Portfolio would enter into a
separate Subadvisory Agreement with Aeltus to provide investment management
services to the Portfolio. Although Aeltus is already a part of the Aetna
organization, the 1940 Act requires that the shareholders of each Portfolio
approve the Subadvisory Agreement. Under the proposed Subadvisory Agreement,
Aeltus would be responsible for deciding which securities to buy, which to
sell and which to keep for each Portfolio. It would also be placing trades
for those securities with third party broker-dealers and, to the extent
directed by Aetna, would be handling the back office administrative functions
related to those activities. It is expected that those activities would
include determining the value of each Portfolio's net assets on a daily basis
and preparing, and providing to Aetna, such other reports, data and
information as Aetna or the Directors request from time to time. In
connection with the management of each Portfolio's investments, Aeltus would
be responsible for assuring that the assets acquired for the Portfolio are in
compliance with the Portfolio's objectives and policies.
Aetna would bear the ultimate responsibility for overseeing the investment
advice provided to the Generation Portfolios. It would monitor Aeltus'
activities to ensure that Aeltus is following regulatory and Board policies,
restrictions and guidelines in managing each Portfolio's assets. Aetna would
be responsible for reporting to the Directors on a regular basis and assuring
that Aeltus maintains an adequate compliance program. The many years of
experience Aetna has in managing assets for mutual funds and for its own
portfolio will enable it to monitor Aeltus' activities to the advantage of
the shareholders of the Generation Portfolios.
Who is Aeltus?
Aeltus is a Connecticut corporation organized in 1972 under the name Aetna
Capital Management, Inc. It currently has its principal offices at 242
Trumbull St., Hartford, Connecticut. Aeltus is a part of the Aetna
organization, and is a wholly-owned subsidiary of Aetna Retirement Holdings,
Inc., which is also the parent of Aetna and which is a wholly-owned
subsidiary of Aetna Retirement Services, Inc. Aetna Retirement Services, Inc.
is a wholly-owned subsidiary of Aetna Life and Casualty Company, a financial
services company with stock listed for trading on the New York Stock
Exchange. John Y. Kim currently serves as the President, Chief Executive
Officer and Chief Investment Officer of Aeltus. Aeltus is registered with the
Commission as an investment adviser.
What are the material terms of the proposed Subadvisory Agreement between
Aetna and Aeltus?
The Subadvisory Agreement gives Aeltus broad latitude in selecting
securities for each Portfolio subject to Aetna'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
Portfolio 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 Aetna is authorized to
do so under the Investment Advisory Agreement, but only as authorized by
applicable law and the rules and regulations of the Commission.
6
<PAGE>
The Subadvisory Agreement requires Aeltus to reduce its fee if Aetna is
required to reduce its fee under the Investment Advisory Agreement. Aetna has
agreed to reduce its fee or reimburse each Portfolio if the expenses borne by
the Portfolio would exceed the expense limitations of any jurisdiction in
which the Portfolio's shares are qualified for sale. Aetna would not be
obligated to reimburse the Portfolio 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 Aetna's fee reduction.
The Subadvisory Agreement provides that, if approved, it will be effective
August 1, 1996, or, if the meeting is adjourned, on the first day of the next
month following the date on which the shareholders approve the Subadvisory
Agreement. It will continue in effect until December 31, 1997 and thereafter
from year to year if approved by the Directors, including a majority of the
Independent Directors. The Subadvisory Agreement will terminate automatically
if the Investment Advisory Agreement terminates or if there is a change in
control of Aeltus. The Subadvisory Agreement for any Portfolio can be
terminated by Aeltus, Aetna or the Portfolio on 60 days' notice. If the
Subadvisory Agreement for any Portfolio terminates, the Portfolio's
investment adviser would automatically assume all management functions for
the Portfolio. The Subadviser can be held liable to the Adviser and the
Generation Portfolios for negligence, bad faith, willful malfeasance or
reckless disregard of its obligations or duties under the Subadvisory
Agreement.
What will the Subadvisory Agreement cost each Portfolio?
The Subadvisory Agreement for each Portfolio provides that Aetna will pay
Aeltus a fee at an annual rate up to 0.35% of the average daily net assets of
the Portfolio. Aetna believes this compensation is fair and reasonable for
the services being provided by Aeltus. This fee is not charged back to, or
paid by, the Portfolio; it is paid by Aetna out of its own resources,
including fees and charges it receives from or in connection with the Fund.
What is the Board of Directors' recommendation?
The Board of Directors unanimously recommends voting FOR approval of the
Subadvisory Agreement for each Portfolio.
What factors did the Board of Directors consider in reaching its
recommendation?
The Directors considered the proposed Subadvisory Agreement for each
Portfolio at meetings held on December 12, 1995, and February 28, 1996.
Moreover, the Contract Review Committee of the Board of Directors, consisting
solely of the Directors who are not employees of Aetna, considered the
Subadvisory Agreement at meetings held on December 11, 1995, February 6,
1996, and February 27, 1996. At all such meetings, the Directors were advised
throughout by Messrs. Goodwin Procter & Hoar, their own independent counsel.
The Directors' recommendation was based on their conclusion that approval
of the Subadvisory Agreement for each Portfolio would mean that the
shareholders of each Portfolio would receive the benefits of the talents of
both Aetna and Aeltus working for the Portfolio.
What happens if the Subadvisory Agreement is not approved?
If the Subadvisory Agreement is not approved by the shareholders of a
Portfolio, Aetna would continue as investment adviser to that Portfolio and
would retain access to all of its current investment advisory capabilities.
7
<PAGE>
PROPOSAL 3
APPROVAL OF A NEW
INVESTMENT ADVISORY AGREEMENT
The Independent Directors have unanimously approved a new Investment
Advisory Agreement for each Portfolio (the "Advisory Agreement"), by and
between the Fund, on behalf of each Portfolio, and Aetna as its investment
adviser and recommend that you vote FOR this Proposal.
What is being proposed?
As part of its comprehensive, strategic review of its investment management
operations and products, during the past several years, Aetna has been
reviewing its various agreements and arrangements for providing services to,
and managing, the funds it advises. Based on this review, Aetna proposed and
the Directors approved a new Administrative Services Agreement for each
Portfolio which, as discussed below, became effective May 1, 1996, and it has
proposed a restructuring of its investment advisory operations as described
in Proposal 2. The new Administrative Services Agreement will limit the fees
for other expenses of the Fund to a maximum of 0.15%, which is significantly
less than the fees charged for the year ended December 31, 1995, as described
below. Aetna is also proposing to enter into a new Investment Advisory
Agreement with each Portfolio of the Fund providing an increase in the annual
fee from 0.50% to 0.60% of average daily net assets as more fully discussed
below. The Independent Directors of the Fund are unanimously recommending
approval of the new Advisory Agreement for the reasons identified below.
What are the primary differences between the existing Investment Advisory
Agreement and the proposed Advisory Agreement?
The proposed Advisory Agreement for each Portfolio has been updated in
several respects. The language has been simplified where possible; the
liability provisions make it clear that Aetna is liable to the Portfolio for
Aetna's negligence; it provides a new fee schedule for Aetna; and it expands
Aetna's ability to use brokerage commissions to pay Portfolio expenses to the
extent allowed by current law. The proposed Advisory Agreements for each
Portfolio are identical in all material respects and a copy of the form of
proposed Advisory Agreement to be entered into by the Fund for each Portfolio
is included with this Statement as Exhibit B. The existing investment
advisory agreements are included as Exhibit C.
Under both the existing and proposed investment advisory agreements, Aetna
is obligated to manage and oversee each Portfolio's day to day operations and
to manage its investment portfolio, whether directly or as discussed in
Proposal 2 under a Subadvisory Agreement with Aeltus.
What are the other significant provisions of the Advisory Agreement?
The Advisory Agreement gives Aetna broad latitude in selecting securities
for the Fund subject to the Directors' oversight. Under the Advisory
Agreement, Aetna may delegate to a subadviser its functions in managing each
Portfolio's investment portfolio, subject to Aetna's oversight. See Proposal
2. The Advisory Agreement allows Aetna 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 Portfolio, or paying Portfolio expenses, in setting the amount of
commissions paid to a broker. Aetna will only use these commissions for
services and expenses to the extent authorized by applicable law and the
rules and regulations of the Commission.
Under the Advisory Agreement for each Portfolio, Aetna has agreed to
reduce its fee or reimburse the Portfolio, if the expenses borne by the
Portfolio would exceed the expense limitations of any jurisdiction in which
the
8
<PAGE>
Portfolio's shares are qualified for sale. Aetna would not be obligated to
reimburse the Portfolio for any expenses which exceed the amount of its
advisory fee for that year. The Advisory Agreement also provides that Aetna
would be responsible for all of its own costs including costs of Aetna
personnel required to carry out its investment advisory duties.
The Advisory Agreement provides that if approved it will be effective
August 1, 1996, or, if the meeting is adjourned, on the first day of the next
month following the date on which the shareholders approve the Advisory
Agreement. It will continue in effect until December 31, 1997 and thereafter
from year to year if approved by the Directors, including a majority of the
Independent Directors. The Advisory Agreement will terminate automatically if
there is a change in control of Aetna. It can be terminated by the Directors,
the shareholders of a Portfolio or Aetna on 60 days' notice.
All of these provisions are the same as those in the existing investment
advisory agreements for each Portfolio, which have been in effect since June
1995 when they were initially approved by shareholders.
Who is Aetna?
Aetna is a Connecticut corporation, licensed as an insurance company in all
50 states. Through its predecessors, Aetna has been offering variable
products and annuities to the public since the 1950's. It currently manages
approximately $22 billion in assets. Aetna 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 indirect wholly-owned subsidiary
of Aetna Life and Casualty Company. Aetna is registered with the Commission
as an investment adviser and a broker-dealer. Aetna serves as the underwriter
for the Fund's shares. The principal offices of Aetna and its parents are
located at 151 Farmington Avenue, Hartford, Connecticut, 06156-8962.
Why has Aetna proposed a change in its fee schedule?
Aetna has entered into two contracts with respect to each Portfolio: (i) an
Advisory Agreement and (ii) an Administrative Services Agreement. As outlined
below, the Board of Directors is recommending changes to the Advisory
Agreement, including a fee increase, and in conjunction with this
recommendation has changed the Administrative Services Agreement to a fixed
fee contract at a lower annual rate than that paid by each Portfolio in 1995.
The net impact of these changes lowers the total fees paid by each Portfolio.
The advisory fee currently paid to Aetna under the existing investment
advisory agreement is determined at an annual rate of 0.50% of average daily
net assets. This fee was originally set in 1994. During 1995, Aetna received
$44,673, $44,352, and $43,540 for its services in managing the Aetna Ascent,
the Aetna Crossroads, and the Aetna Legacy Variable Portfolios, respectively,
which had net assets as of December 31, 1995 of approximately $18.1 million,
$18.0 million, and $17.6 million, respectively.
In operating the Generation Portfolios since 1994, we have determined that
the cost and complexity of managing the multiple asset class portfolios are
greater than we anticipated. At the same time, the financial markets have
become increasingly complex and the need for high quality personnel, research
and equipment has increased proportionately. With the recent growth in the
mutual fund industry, such resources have become more expensive and harder to
retain.
Further, during the past two years, Aetna has: (i) hired a number of
highly-qualified and experienced investment professionals, attracting them in
part by replacing its existing compensation structure with a competitive
compensation program designed to attract and retain such personnel; (ii)
instituted the use of quantitative research and analytical tools and
techniques to augment its traditional securities selection processes for the
purpose of improving performance of the portfolios it manages, including
those of the Generation Portfolios; and (iii) upgraded
9
<PAGE>
its information and reporting systems to increase the volume of data
gathered, the speed at which such data are collected, and its ability to
analyze and report on such data.
Aetna believes that these trends in the financial markets will continue;
therefore, the proposed advisory fees are critical to retaining the resources
it has added and are necessary for Aetna to continue providing high quality
management to the Generation Portfolios in an increasingly competitive and
dynamic environment whether through Aetna directly or through Aeltus as
discussed in Proposal 2. Aetna believes enhancements are integral to its goal
of improving performance and reducing volatility for the investment
portfolios that it manages, including those of the Generation Portfolios, and
for these Portfolios to remain competitive in their respective markets.
The fees charged to manage these funds were also low when compared to the
fees Aetna charges for managing the Generation Funds, which are three series
funds managed identically to the Portfolios, but sold directly to the public.
Aetna receives a management fee at an annual rate of 0.80% of average daily
net assets and an administrative fee of 0.25% of average daily net assets for
each of the Aetna Ascent, Aetna Crossroads and Aetna Legacy series. Aetna
believes that the proposed advisory fee at an annual rate of 0.60% of each
Portfolio's average daily net assets is competitive with fees charged by
comparable advisers for managing similar funds. The Portfolio's fees were
compared specifically to those of flexible portfolios which involve
management of fewer asset classes than the Portfolio. If the new Advisory
Agreement had been in effect for 1995, the Aetna Ascent, Aetna Crossroads,
and Aetna Legacy Variable Portfolios would have paid advisory fees of
$53,482, $53,169, and $52,198, respectively, which represents a 20% increase.
What other fees or charges are paid by the Portfolios?
Under an Administrative Services Agreement with each Portfolio, effective
through April 1996, each Portfolio reimburses Aetna for its administrative
costs in managing the Portfolio. The Administrative Services Agreement
provides for the reimbursement of a share of Aetna's overhead related to
managing the Portfolio. In addition, each Portfolio has been paying its
ordinary recurring expenses such as legal fees, Directors' fees, custodial
fees and insurance premiums. Under these arrangements, in 1995, Aetna Ascent,
Aetna Crossroads, and Aetna Legacy Variable Portfolios paid a total of
$96,041, $96,465, and $96,465, respectively (equal to an annual rate of
1.09%, 1.10%, and 1.12%, respectively, of average daily net assets) to Aetna
for reimbursements of its costs in performing administrative services and for
the Portfolios' other ordinary recurring expenses.
As discussed above, the Directors approved a change to the Administrative
Services Agreement with each Portfolio that fix these charges so they no
longer vary. This arrangement was adopted so that each Portfolio would be
able to fix the amount of its costs and expenses. The new Administrative
Services Agreement with each Portfolio provides for a fixed fee at an annual
rate of 0.15% of average daily net assets. This new rate represents a
reduction in cost to each Portfolio at current asset levels.
The following tables and examples summarize the effect of the proposed
advisory fee on each Portfolio's expenses.
COMPARATIVE FEE TABLE
Aetna Ascent Variable Portfolio
<TABLE>
<CAPTION>
Fees as
Annual Fund Operating Expenses (as a of Proposed Fee
percentage of average daily net assets) 5/1/96* for 8/1/96
- ------------------------------------------- --------- ------------
<S> <C> <C>
Management Fee 0.50% 0.60%
Administrative Costs and other Expenses 0.15% 0.15%
---- ----
Total Fund Operating Expenses 0.65% 0.75%
</TABLE>
10
<PAGE>
Aetna Crossroads Variable Portfolio
<TABLE>
<CAPTION>
Fees as
Annual Fund Operating Expenses (as a of Proposed Fee
percentage of average daily net assets) 5/1/96* for 8/1/96
- ------------------------------------------- --------- ------------
<S> <C> <C>
Management Fee 0.50% 0.60%
Administrative Costs and other Expenses 0.15% 0.15%
---- ----
Total Fund Operating Expenses 0.65% 0.75%
</TABLE>
Aetna Legacy Variable Portfolio
<TABLE>
<CAPTION>
Fees as
Annual Fund Operating Expenses (as a of Proposed Fee
percentage of average daily net assets) 5/1/96* for 8/1/96
- ------------------------------------------- --------- ------------
<S> <C> <C>
Management Fee 0.50% 0.60%
Administrative Costs and other Expenses 0.15% 0.15%
---- ----
Total Fund Operating Expenses 0.65% 0.75%
</TABLE>
* The administrative fee was changed by the Board of Directors effective May
1, 1996.
Examples:
The following charts show the expenses that you would pay on a $1,000
investment under the existing and proposed fees and expenses described above,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
Aetna Ascent Variable Portfolio
<TABLE>
<CAPTION>
1 3 5
year years years 10 years
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Fees and Expenses as of 5/1/96 $7 $21 $36 $81
Proposed Fees and Expenses $8 $24 $42 $93
</TABLE>
Aetna Crossroads Variable Portfolio
<TABLE>
<CAPTION>
1 3 5
year years years 10 years
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Fees and Expenses as of 5/1/96 $7 $21 $36 $81
Proposed Fees and Expenses $8 $24 $42 $93
</TABLE>
Aetna Legacy Variable Portfolio
<TABLE>
<CAPTION>
1 3 5
year years years 10 years
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Fees and Expenses as of 5/1/96 $7 $21 $36 $81
Proposed Fees and Expenses $8 $24 $42 $93
</TABLE>
The purpose of the above tables and examples is to assist shareholders in
understanding the effects of the proposed fee on the fees and expenses
charged to each Portfolio. The Generation Portfolios are only available
through a variable annuity contract or variable life policy. The above tables
and examples do not reflect separate account and other contract or policy
charges and expenses, including sales loads. The examples above should not be
considered a representation of past or future expenses or returns of any
Portfolio. Actual expenses and returns may vary from year to year and may be
higher or lower than those shown above.
What is the change in the use of brokerage commissions for the Generation
Portfolios?
The existing agreement allows the investment adviser to take into
consideration research and related services provided by a broker to the adviser
in paying commissions to a broker for the portfolio transactions of the
Generation Portfolios. The Directors recommend that the investment adviser also
should be allowed to take into consideration
11
<PAGE>
Portfolio expenses actually paid by the broker on behalf of the Portfolio
where it is allowed by current law. The investment adviser of the Portfolio
is required to place trades for the Portfolio's securities with brokers who
provide "best execution." This does not always mean the lowest commission if
the broker provides research or other related services to the adviser. Recent
developments have indicated that the Commission will also allow an adviser to
place trades with a broker, and to take into consideration in the
commissions, actual expenses paid by the broker for the Portfolio. This can
only be done in compliance with certain reporting rules and only with respect
to expenses that directly benefit the Portfolio paying the commissions. The
proposed Advisory Agreement for each Portfolio would allow such transactions
subject to applicable laws.
What is the Board of Directors' recommendation?
The Board of Directors unanimously recommends voting FOR approval of the
Advisory Agreement for each Portfolio.
What factors did the Board of Directors consider in reaching its
recommendation?
The Directors considered the proposed Advisory Agreement for each Portfolio
at meetings held on December 12, 1995, and February 28, 1996. The Contract
Review Committee of the Board of Directors, consisting solely of Directors
who are not employees of Aetna, considered the Advisory Agreement at meetings
held on December 11, 1995, February 6, 1996 and February 27, 1996. At all
such meetings, these Directors were advised throughout by Messrs. Goodwin
Procter & Hoar, their own independent counsel.
The Directors' approval of the new Advisory Agreement for each Portfolio
with an increased fee was based on the following factors, all of which they
considered material and which are listed in the order of their importance,
with the most important factor listed first:
1. The new fee will provide Aetna with the essential financial resources
it needs to compete effectively in the increasingly complex and
competitive financial markets.
2. The Directors believe that Aetna should receive a fair, competitive fee
in order to provide it with adequate resources to produce and provide
competitive, high quality services on behalf of the Generation
Portfolios.
3. The new fee would compensate Aetna for costly enhancements it is
currently maintaining and which have been made over the past two years
with regard to investment, administrative, operational and shareholder
services. These enhancements include: (i) the hiring of a number of
highly qualified and experienced investment professionals, (ii)
replacing its former compensation system with a more competitive system
designed to attract and retain such highly qualified personnel, (iii)
instituting the use of quantitative research and analytical tools and
techniques, and (iv) upgrading its information and reporting systems.
4. The new fee would reflect the benefits to be derived from the
combination of Aetna's and Aeltus' investment management capabilities.
In the course of its deliberations, the Directors asked for and received
extensive data concerning, among other things, (i) the nature, quality and
scope of services that Aeltus, after combining with Aetna, would provide,
(ii) Aetna's profitability, (iii) Aetna's financial condition, (iv) the
expense ratios of each Portfolio both before and after the proposed fee
increase and as compared with other comparable variable funds, and (v) the
level of Aetna's current fee in general and as compared to other comparable
variable funds.
What would happen if the Advisory Agreement is not approved?
If the Advisory Agreement is not approved by a Portfolio's shareholders,
the existing agreement will continue in effect with respect to that
Portfolio. Although Aetna expects that it would proceed with the Subadvisory
12
<PAGE>
Agreement with Aeltus (if it is approved), it would have fewer resources
available to manage your Generation Portfolios effectively in the future.
ADDITIONAL INFORMATION
Officers of the Fund
The principal executive officers of the Fund, his or her age and principal
occupation are set forth below. Officers of the Fund who also serve as
employees of Aetna are also listed below. The term of office of each
executive officer of the Fund is until the next annual meeting of the Fund or
until his or her successor shall have been duly elected and qualified.
<TABLE>
<CAPTION>
Name and Position with the Fund
Age and other Principal Occupations
------------------------------ ---------------------------------------------------------------
<S> <C>
Shaun P. Mathews President and Director of the Fund; see description under
40 years of age "Election of Directors."
James C. Hamilton Vice President and Treasurer of the Fund; Chief Financial
55 years of age Officer, Aetna Investment Services, Inc.; Vice President and
Actuary, Aetna Life Insurance Company.
Susan E. Bryant Secretary of the Fund; Counsel to Aetna (March 1993 to
48 years of age Present); General Counsel and Corporate Secretary, First
Investors Corporation (April 1991 to March 1993);
Administrator, Oklahoma Department of Securities (August 1986
to April 1991).
</TABLE>
Directors and Principal Executive Officer of Aetna
The name, business address and principal occupation of Aetna's principal
executive officer and directors are as follows:
<TABLE>
<CAPTION>
Name and
Business Address Principal Occupations
------------------------------ ---------------------------------------------------------------
<S> <C>
Daniel P. Kearney Chairman, Director and President (principal executive officer);
151 Farmington Avenue see description under "Election of Directors."
Hartford, Connecticut 06156
Christopher J. Burns Director and Senior Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
Laura R. Estes Director and Senior Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
13
<PAGE>
Name and
Business Address Principal Occupations
------------------------------ ---------------------------------------------------------------
Timothy A. Holt Director and Senior Vice President;
151 Farmington Avenue see description under "Election of Directors."
Hartford, Connecticut 06156
Gail P. Johnson Director and Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
John Y. Kim Director and Senior Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
Shaun P. Mathews Director and Vice President; see description under "Election of
151 Farmington Avenue Directors."
Hartford, Connecticut 06156
Glen Salow Director and Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
Creed R. Terry Director and Vice President.
151 Farmington Avenue
Hartford, Connecticut 06156
</TABLE>
OTHER BUSINESS
The management of the Fund knows of no other business to be presented at
the meeting other than the matters set forth in this Statement. If any other
business properly comes before the meeting, the persons designated as proxies
will exercise their best judgment in deciding how to vote on such matters.
SHAREHOLDER PROPOSALS
The Articles of Incorporation and the By-Laws of the Fund provide that the
Fund need not hold annual shareholder meetings, except in those years in
which the election of Directors is required by the 1940 Act. Therefore, it is
probable that no annual meeting of shareholders will be held in 1996 or in
subsequent years until so required. For those years in which annual
shareholder meetings are held, proposals which shareholders of the Fund
intend to present for inclusion in the proxy materials with respect to the
annual meeting of shareholders must be received by the Fund within a
reasonable period of time before the solicitation is made.
Please complete the enclosed authorization card and return it promptly in
the enclosed self-addressed postage- paid envelope. You may revoke your proxy
at any time prior to the meeting by written notice to the Fund or by
submitting an authorization card bearing a later date.
/s/ Susan E. Bryant
Susan E. Bryant
Secretary
14
<PAGE>
EXHIBIT A
PROPOSED
FORM OF SUBADVISORY AGREEMENT
THIS AGREEMENT is made by and among AETNA LIFE INSURANCE AND ANNUITY FUND,
a Connecticut corporation (the "Adviser"), AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO, a Maryland Corporation, (the "Fund"), on behalf of its AETNA
VARIABLE PORTFOLIO (the "Portfolio") 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 consisting of multiple investment portfolios, under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, pursuant to authority granted by the Fund's Articles of
Incorporation, the Fund has established the Portfolio as a separate
investment portfolio; 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, on behalf of the Portfolio, (the "Investment Advisory
Agreement") which appoints the Adviser as the investment adviser for the
Portfolio; 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, on behalf of the Portfolio, hereby appoint the Subadviser to manage the
assets of the Portfolio 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 Directors (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 Portfolio 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 Portfolio and shall continuously supervise the
investment and reinvestment of cash, securities and instruments or other
property comprising the assets of the Portfolio. In carrying out these
duties, the Subadviser shall:
A-1
<PAGE>
1. select the securities to be purchased, sold or exchanged by the
Portfolio or otherwise represented in the Portfolio'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 Portfolio, 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
Portfolio, securities held by or under consideration for the Portfolio,
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
Portfolio appointed by the Board, concerning deliveries of securities,
transfers of currencies and payments of cash for the Portfolio, as
required to carry out the investment activities of the Portfolio as
contemplated by this Agreement; and
6. provide such financial support, administrative and other services, such
as preparation of financial data, determination of the Portfolio'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 Portfolio.
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
Portfolio and the Subadviser's compliance program to ensure that the
Portfolio's assets are invested in compliance with the Subadvisory
Agreement and the Portfolio's investment objectives and policies as
adopted by the Board and described in the most current effective
amendment of the registration statement for the Portfolio, as filed
with the Commission under the Securities Act of 1933, as amended (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. file all periodic reports required to be filed by the Portfolio 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 Portfolio;
A-2
<PAGE>
7. oversee all matters relating to (i) the offer and sale of shares of the
Portfolio, 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 Portfolio,
including monitoring the corporate records of the Portfolio,
maintaining contact with the Board, preparing for, organizing and
attending meetings of the Board and the Portfolio'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 Portfolio 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 Portfolio 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 Portfolio in carrying out its obligations
hereunder.
B. Representations and Warranties of the Adviser
The Adviser hereby represents and warrants to the Subadviser 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
A-3
<PAGE>
the Subadviser and the Portfolio 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 Portfolio in carrying out its obligations hereunder.
C. Representations and Warranties of the Portfolio and the Fund
The Fund, on behalf of the Portfolio, hereby represents and warrants to
the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly incorporated
as a Corporation under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its obligations
hereunder.
2. Registration. The Fund is registered as an investment company with the
Commission under the 1940 Act and shares of the Portfolio are
registered or qualified for offer and sale to the public under the 1933
Act and all applicable state securities laws. Such registrations or
qualifications, will be kept in effect during the term of this
Agreement.
IV. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Subadviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio 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 Portfolio
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 Portfolio 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
Portfolio who provide payment for expenses of the Portfolio. 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 Portfolio 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 Portfolio 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 on behalf of the Portfolio, shall at all times
be subject to any directives of the Board.
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VI. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Subadviser shall
at all times conform to:
1. all applicable provisions of the 1940 Act, the Advisers Act and any
rules and regulations adopted thereunder;
2. all policies and procedures of the Portfolio as adopted by the Board
and as described in the Registration Statement;
3. the provisions of the Articles of Incorporation of the Fund, as amended
from time to time;
4. the provisions of the Bylaws of the Fund, as amended from time to time;
and
5. 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 Portfolio, 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 Portfolio. 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 Portfolio if the expenses borne
by the Portfolio exceed the expense limitations applicable to the Portfolio
imposed by the securities laws or regulations of any jurisdiction in which
the Portfolio shares are qualified for sale. Accordingly, the Subadviser
agrees that, if, for any fiscal year, the total of all ordinary business
expenses of the Portfolio, 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 Portfolio 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 Portfolio 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 Portfolio 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.
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IX. NONEXCLUSIVITY
The services of the Subadviser with respect to the Portfolio 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 directors of the Fund; that officers
or directors of the Adviser or officers or directors 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:
1. (a) by the Board or (b) by the vote of a majority of the Portfolio's
outstanding voting securities (as defined in Section 2(a)(42) of the
1940 Act), and
2. by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Fund), by votes cast in
person at a meeting specifically called for such purpose.
XI. TERMINATION
This Agreement may be terminated:
1. at any time, without the payment of any penalty, by vote of the Board
or by vote of a majority of the outstanding voting securities of the
Portfolio; or
2. by the Adviser, the Fund, on behalf of the Portfolio, 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
3. automatically in the event there is an "assignment" of this Agreement,
as defined in Section 2 (a) (4) of the 1940 Act.
XII. LIABILITY
The Subadviser shall be liable to the Portfolio and the Adviser and shall
indemnify the Portfolio and the Adviser for any losses incurred by the
Portfolio, 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.
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:
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if to the Fund, on behalf of the Portfolio 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 the Portfolio 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 Portfolio.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day of ,
19 .
Attest: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By: ----------------------------------------
Name: ----------------------------------
Title: ---------------------------------
Attest: AELTUS INVESTMENT MANAGEMENT, INC.
By: ----------------------------------------
Name: ----------------------------------
Title: ---------------------------------
Attest: AETNA GENERATION PORTFOLIOS, FUND
on behalf of its
Aetna ____________ Variable Portfolio
By: ----------------------------------------
Name: ---------------------------------
Title:---------------------------------
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EXHIBIT B
PROPOSED
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 GENERATION
PORTFOLIOS, INC., a Maryland corporation (the "Fund"), on behalf of its AETNA
_______ VARIABLE PORTFOLIO (the "Portfolio"), 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 consisting of multiple investment portfolios under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, pursuant to authority granted by the Fund's Articles of
Incorporation, the Fund has established the Portfolio as a separate
investment portfolio; 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, on behalf of the Portfolio, and the Adviser desire to
enter into an agreement to provide for investment advisory and management
services for the Portfolio 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 Directors (the "Board"), the Fund, on behalf
of the Portfolio, hereby appoints the Adviser to serve as the investment
adviser to the Portfolio, 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
Portfolio and has no authority to act for or represent the Portfolio in any
way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the
following:
1. supervise all aspects of the operations of the Portfolio;
2. select the securities to be purchased, sold or exchanged by the
Portfolio or otherwise represented in the Portfolio's investment
portfolio, place trades for all such securities and regularly report
thereon to the Board;
3. formulate and implement continuing programs for the purchase and sale
of securities and regularly report thereon to the Board;
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4. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally, the
Portfolio, securities held by or under consideration for the Portfolio,
or the issuers of those securities;
5. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's
performance of its duties hereunder;
6. obtain the services of, contract with, and provide instructions to
custodians and/or subcustodians of the Portfolio's securities, transfer
agents, dividend paying agents, pricing services and other service
providers as are necessary to carry out the terms of this Agreement;
7. prepare financial and performance reports, calculate and report daily
net asset values, and prepare any other financial data or reports, as
the Adviser from time to time, deems necessary or as are requested by
the Board; and
8. take any other actions which appear to the Adviser and the Board
necessary to carry into effect the purposes of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the 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 Portfolio in carrying out its obligations hereunder.
B. Representations and Warranties of the Portfolio and the Fund,
The Fund, on behalf of the Portfolio, hereby represents and warrants to the
Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly incorporated
under the laws of the State of Maryland and it is authorized to enter
into this Agreement and carry out its obligations hereunder.
2. Registration. The Fund is registered as an investment company with the
Commission under the 1940 Act and shares of the Portfolio are
registered or qualified 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 or qualifications will be
kept in effect during the term of this Agreement.
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IV. DELEGATION OF RESPONSIBILITIES
A. Appointment of Subadviser
Subject to the approval of the Board and the shareholders of the
Portfolio, the Adviser may enter into a Subadvisory Agreement to engage a
subadviser (the "Subadviser") to the Adviser with respect to the Portfolio.
B. Duties of Subadviser
Under a Subadvisory Agreement, the Subadviser may be delegated some or all
of the following duties of the Adviser:
1. determine which securities from which issuers shall be purchased, sold
or exchanged by the Portfolio or otherwise represented in the
Portfolio'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
Portfolio, securities held by or under consideration for the Portfolio,
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
Portfolio appointed by the Board, as to deliveries of securities,
transfers of currencies and payments of cash for the Portfolio as
required to carry out the investment activities of the Portfolio, 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
Portfolio and the Subadviser's compliance program to ensure that the
Portfolio's assets are invested in compliance with the Subadvisory
Agreement and the Portfolio's investment objectives and policies as
adopted by the Board and described in the most current effective
amendment of the registration statement for the Portfolio, 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
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4. oversee all matters relating to the offer and sale of the Portfolio's
shares, the Fund's corporate governance, reports to the Board,
contracts with all third parties on behalf of the Portfolio for
services to the Portfolio, reports to regulatory authorities and
compliance with all applicable rules and regulations affecting the
Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio who
provide payment for expenses of the Portfolio. 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
Portfolio 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 Portfolio to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits
received.
VI. CONTROL BY THE BOARD
Any investment program undertaken by the Adviser pursuant to this
Agreement, as well as any other activities undertaken by the Adviser on
behalf of the Portfolio 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:
1. all applicable provisions of the 1940 Act and any rules and regulations
adopted thereunder;
2. the provisions of the registration statement of the Fund, as the same
may be amended from time to time, under the 1933 Act and the 1940 Act;
3. the provisions of the Fund's Articles of Incorporation, as amended;
4. the provisions of the Bylaws of the Fund, as amended; and
5. any other applicable provisions of state and federal law.
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VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Fund, on behalf of the Portfolio, shall pay to
the Adviser an annual fee, payable monthly, equal to .60% of the average
daily net assets of the Portfolio. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily at
the rate of 1/365 of .60% of the daily net assets of the Portfolio. 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 Portfolio acknowledges on behalf of the Portfolio
that the Adviser will pay to the Subadviser, as compensation for acting as
Subadviser to the Portfolio, the fees specified in the Subadvisory Agreement.
IX. EXPENSES
The expenses in connection with the management of the Portfolio shall be
allocated between the Portfolio 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
Portfolio, including without limitation, office space, office
equipment, telephone and postage costs;
2. all fees and expenses of all directors, officers and employees, if any,
of the 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 Portfolio
The Portfolio 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 Portfolio's investment portfolio or other investment transactions
incurred in managing the Portfolio's assets, including portions of
commissions that may be paid to reflect brokerage research services
provided to the Adviser;
3. fees and expenses of the Portfolio's independent accountants and legal
counsel and the independent directors' legal counsel;
4. fees and expenses of any administrator, transfer agent, custodian,
dividend, accounting, pricing or disbursing agent of the Portfolio;
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
directors) of the Fund which benefit the Portfolio;
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8. all fees and expenses of the Company's directors, 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 Portfolio,
except for those expenses paid by third parties in connection with the
distribution of Portfolio shares and all costs and expenses of
shareholders' meetings;
10. all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares of the Portfolio or in
cash;
11. costs and expenses of promoting the sale of shares in the Portfolio,
including preparing prospectuses and reports to shareholders of the
Portfolio, provided, nothing in this Agreement shall prevent the
charging of such costs to third parties involved in the distribution
and sale of Portfolio shares;
12. fees payable by the Portfolio to the Commission or to any state
securities regulator or other regulatory authority for the
registration of shares of the Portfolio in any state or territory of
the United States or of the District of Columbia;
13. all costs attributable to investor services, administering shareholder
accounts and handling shareholder relations, (including, without
limitation, telephone and personnel expenses), which costs may also be
charged to third parties by the Adviser; and
14. any other ordinary, routine expenses incurred in the management of the
Portfolio's assets, and any nonrecurring or extraordinary expenses, including
organizational expenses, litigation affecting the Portfolio and any
indemnification by the Fund of its officers, directors or agents.
X. EXPENSE LIMITATION
If, for any fiscal year, the total of all ordinary business expenses
payable by the Portfolio, 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 Portfolio 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 Portfolio 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
Portfolio that are not required by this Agreement. Such services will be
performed on behalf of the Portfolio and the Adviser may receive from the
Portfolio 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 Portfolio and its shareholders. Payment or assumption
by the Adviser of any Portfolio expense that the Adviser is not otherwise
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required to pay or assume under this Agreement shall not relieve the Adviser
of any of its obligations to the Portfolio nor obligate the Adviser to pay or
assume any similar Portfolio 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 Portfolio 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
Portfolio; and (c) such other administrative services as may be furnished
from time to time by the Adviser to the Fund or the Portfolio at the request
of the Board.
XII. NONEXCLUSIVITY
The services of the Adviser to the Portfolio 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 directors of the Fund, and that officers
or directors 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 Portfolio'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:
1. a. by the Board, or
b. by the vote of a majority of the Portfolio's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and
2. by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Fund), by votes cast in
person at a meeting specifically called for such purpose.
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XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Board or by vote of a majority of the Portfolio'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
The Adviser shall be liable to the Portfolio and shall indemnify the
Portfolio for any losses incurred by the Portfolio, whether in the purchase,
holding or sale of any security or otherwise, to the extent that such losses
resulted from an act or omission on the part of the Adviser or its officers,
directors or employees, that is found to involve willful misfeasance, bad
faith or negligence, or reckless disregard by the Adviser of its duties under
this Agreement, in connection with the services rendered by the Adviser
hereunder.
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, the Portfolio or the Adviser:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attn: 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 Portfolio 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 Portfolio.
B-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day of , 199 .
Attest: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By: ----------------------------------------
Name: ----------------------------------
Title: ---------------------------------
Attest: AETNA GENERATION PORTFOLIOS, FUND
on behalf of its
Aetna ____________ Variable Portfolio
By: ----------------------------------------
Name: ---------------------------------
Title:---------------------------------
B-9
<PAGE>
EXHIBIT C-1
EXISTING
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA GENERATION PORTFOLIOS, INC., a
Maryland corporation (the "Company"), on behalf of its Aetna Ascent Variable
Portfolio and AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut
insurance corporation (the "Adviser"), as of the Date set forth below.
R E C I T A L
WHEREAS, the Company is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations promulgated thereunder;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engages
in the business of acting as an investment adviser;
WHEREAS, the Company has established the Aetna Ascent Variable Portfolio
(the "Fund");
WHEREAS, the Company, on behalf of 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, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
The Adviser is hereby appointed to serve as the investment adviser to the
Fund, to provide investment advisory services set forth below in Section II,
subject to the terms of this Agreement and the policies and control of the
Company's Board of Directors (the "Board"). The Adviser shall, for all
purposes herein, be deemed an independent contractor and shall have, unless
otherwise expressly provided or authorized, no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall provide the
following services:
A. supervise all aspects of the operations of the Fund;
B. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund's portfolio and whether concerning the individual issuers of the
securities included in the Fund's portfolio or the activities in which
the issuers engage, or with respect to securities that the Adviser
considers desirable for inclusion in the Fund's portfolio;
C. determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Board;
D. formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the
Board;
C-1-1
<PAGE>
E. 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 account of the Fund, in
relation to the matters contemplated by this Agreement; and
F. take, on behalf of the Fund, all actions which appear to the Company
and the Fund necessary to carry into effect the purchase and sale of
securities for the Fund and the supervisory functions listed above,
including the placing of orders for the purchase and sale of securities
for the Fund.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
Adviser hereby represents and warrants to the Company as follows:
1. Due Incorporation and Organization. The Adviser is duly organized and
is in good standing under the laws of the State of Connecticut and is
fully authorized to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser with
the Securities and Exchange Commission (the "SEC") 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 AND THE COMPANY
The Company, on behalf of the Fund, hereby represents and warrants to the
Adviser as follows:
1. Due Incorporation and Organization. The Company has been duly
incorporated under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its terms.
2. Registration. The Company is registered as an investment company with
the SEC 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 shall:
1. provide the Adviser with such economic research and securities analysis
as the Adviser may from time to time consider necessary or advisable in
connection with the Adviser's performance of its duties hereunder;
2. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund, and
C-1-2
<PAGE>
whether concerning the individual issuers whose securities are included
in the Fund or the activities in which such issuers engage, or with
respect to securities that the Subadviser considers desirable for
inclusion in the Fund's investment portfolio;
3. determine which issuers and securities shall be purchased, sold or
exchanged by the Fund or otherwise represented in the Fund's investment
portfolio and regularly report thereon to the Adviser and, at the
request of the Adviser, to the Board; and
4. formulate and implement continuing programs for the purchase and sale
of the securities of such issuers and regularly report thereon to the
Adviser and, at the request of the Adviser, to the Board.
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 to ensure that the Fund's assets are invested in compliance with
the Subadvisory Agreement and the Fund's Registration Statement;
2. consult with and assist the Subadviser in maintaining appropriate
policies, procedures and records so that the Subadviser operates its
business and any investment program hereunder in compliance with
applicable laws;
3. establish and maintain periodic 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 matters relating to Fund promotion, marketing materials and the
Subadviser's reports to the Board.
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, as amended) to the Fund and/or the other accounts over
which the Adviser or its affiliates exercise investment discretion. The
Adviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund that is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if 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. 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
C-1-3
<PAGE>
received.
VI. CONTROL BY THE BOARD OF DIRECTORS
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;
B. the provisions of the registration statement of the Company, as the
same may be amended from time to time, under the 1933 Act and the 1940
Act;
C. the provisions of the Company's Articles of Incorporation, as amended;
D. the provisions of the By-Laws of the Company, 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 Company, on behalf of the Fund, shall pay to the
Adviser an annual fee, payable monthly, equal to .50% 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
the annual advisory fee 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 as set forth above. Subject to the
provisions of Paragraph X hereof, payment of the Adviser's compensation for
the preceding month shall be made as promptly as possible. For so long as a
Subadvisory Agreement is in effect, the Company acknowledges on behalf of the
Fund 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
allocable 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 of those of
its personnel engaged in providing investment advice to the Fund,
including without limitation, office space, office equipment, telephone
and postage costs; and
C-1-4
<PAGE>
2. Any fees and expenses of all directors of the Company who are employees
of the Adviser or an affiliated entity and any salaries and employment
benefits of officers of the Company who are affiliated persons of the
Adviser for acting as officers of the Company.
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 chargeable in connection with securities or other investment
transactions, 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 public accountants and
outside legal counsel;
4. Expenses of printing and distributing proxies, proxy statements,
prospectuses and reports to shareholders of the Fund, except as such
expenses may be borne by any distributor of the Fund;
5. Interest and taxes;
6. The fees and expenses of those of the Company's directors who are not
"interested persons" (as defined in the 1940 Act) of the Company or
the Adviser;
7. Shareholders' meeting expenses;
8. Administrator, transfer agent, custodian and dividend disbursing agent
fees and expenses;
9. Fees of dividend, accounting or pricing agents appointed by the Fund;
10. Fees payable by the Company to the SEC or in connection with the
registration of shares of the Fund under the laws of any state or
territory of the United States or of the District of Columbia;
11. Fees and assessments of the Investment Company Institute or any
successor organization or other association memberships approved by
the Board;
12. Such nonrecurring or extraordinary expenses as may arise, including
organizational expenses, litigation affecting the Fund and any
indemnification by the Company of its officers, directors or agents
with respect thereto;
13. All other ordinary business expenses incurred in the operations of the
Fund unless specifically provided otherwise in this paragraph IX;
14. All costs attributable to investor services, administering shareholder
accounts and handling shareholder relations (including, without
limitation, telephone and personnel expenses);
15. All expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares of the Fund or in cash;
and
16. Insurance premiums on property or personnel (including officers and
directors) of the Company which inure to its benefit.
C-1-5
<PAGE>
X. EXPENSE LIMITATION
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 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 in order to
reduce such excess expenses, but 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 management 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 of Directors, 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
Company (including applicable office space, facilities and equipment) whose
normal duties consist of maintaining the financial accounts and books and
records of the Company and 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 Company or the Fund at the request of the Board.
XII. NON-EXCLUSIVITY
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 directors of the Company, and that
officers or directors of the Company may serve as officers or directors of
the Adviser to the extent permitted by law; and that the officers and
directors of the Adviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or
trust, including other investment companies.
C-1-6
<PAGE>
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 Company's directors 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 directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Company), by votes cast in
person at a meeting specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Company's directors 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 OF ADVISER AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or negligence on the part
of the Adviser or its officers, directors or employees, or reckless disregard
by the Adviser of its duties under this Agreement, the Adviser shall not be
liable to the Company or to any shareholder of the Company for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser or
any officer, director or employee of the Adviser, to the extent permitted by
applicable law, the Company hereby agrees to indemnify and hold the Adviser
harmless from and against all claims, actions, suits and proceedings at law
or in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating to the
sale, purchase, pledge of, advertisement of, or solicitation of sales or
purchases of any security (whether of the Fund or otherwise) by the Company,
its officers, directors, employees or agents in alleged violation of
applicable federal, state or foreign laws, rules or regulations.
C-1-7
<PAGE>
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Adviser and
that of the Company for this purpose shall be 151 Farmington Avenue,
Hartford, Connecticut 06156.
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 SEC 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
SEC, such provisions shall be deemed to incorporate the effect of such rule,
regulation or order.
XIX. SERVICE MARK
The service mark of the Company and the Fund and the name "Aetna" have
been adopted by the Company 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
Corporation 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 15th day of June,
1995.
Attest: AETNA GENERATION
PORTFOLIOS, INC.
/s/ Julie E. Rockmore on behalf of its Aetna Ascent
Variable Portfolio series
By: /s/ Shaun P. Mathews
Name: Shaun P. Mathews
Title: President
Attest:
AETNA LIFE INSURANCE AND
/s/ Susan E. Schechter ANNUITY COMPANY
By: /s/ James C. Hamilton
Name: James C. Hamilton
Title: Vice President and Treasurer
C-1-8
<PAGE>
EXHIBIT C-2
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA GENERATION PORTFOLIOS, INC., a
Maryland corporation (the "Company"), on behalf of its Aetna Crossroads
Variable Portfolio and AETNA LIFE INSURANCE AND ANNUITY COMPANY, a
Connecticut insurance corporation (the "Adviser"), as of the Date set forth
below.
R E C I T A L
WHEREAS, the Company is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations promulgated thereunder;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engages
in the business of acting as an investment adviser;
WHEREAS, the Company has established the Aetna Crossroads Variable
Portfolio (the "Fund");
WHEREAS, the Company, on behalf of 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, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
The Adviser is hereby appointed to serve as the investment adviser to the
Fund, to provide investment advisory services set forth below in Section II,
subject to the terms of this Agreement and the policies and control of the
Company's Board of Directors (the "Board"). The Adviser shall, for all
purposes herein, be deemed an independent contractor and shall have, unless
otherwise expressly provided or authorized, no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall provide the
following services:
A. supervise all aspects of the operations of the Fund;
B. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund's portfolio and whether concerning the individual issuers of the
securities included in the Fund's portfolio or the activities in which
the issuers engage, or with respect to securities that the Adviser
considers desirable for inclusion in the Fund's portfolio;
C. determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Board;
D. formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the
Board;
C-2-1
<PAGE>
E. 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 account of the Fund, in
relation to the matters contemplated by this Agreement; and
F. take, on behalf of the Fund, all actions which appear to the Company
and the Fund necessary to carry into effect the purchase and sale of
securities for the Fund and the supervisory functions listed above,
including the placing of orders for the purchase and sale of securities
for the Fund.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
Adviser hereby represents and warrants to the Company as follows:
1. Due Incorporation and Organization. The Adviser is duly organized and
is in good standing under the laws of the State of Connecticut and is
fully authorized to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser with
the Securities and Exchange Commission (the "SEC") 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 AND THE COMPANY
The Company, on behalf of the Fund, hereby represents and warrants to the
Adviser as follows:
1. Due Incorporation and Organization. The Company has been duly
incorporated under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its terms.
2. Registration. The Company is registered as an investment company with
the SEC 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 shall:
1. provide the Adviser with such economic research and securities analysis
as the Adviser may from time to time consider necessary or advisable in
connection with the Adviser's performance of its duties hereunder;
2. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund, and
C-2-2
<PAGE>
whether concerning the individual issuers whose securities are included
in the Fund or the activities in which such issuers engage, or with
respect to securities that the Subadviser considers desirable for
inclusion in the Fund's investment portfolio;
3. determine which issuers and securities shall be purchased, sold or
exchanged by the Fund or otherwise represented in the Fund's investment
portfolio and regularly report thereon to the Adviser and, at the
request of the Adviser, to the Board; and
4. formulate and implement continuing programs for the purchase and sale
of the securities of such issuers and regularly report thereon to the
Adviser and, at the request of the Adviser, to the Board.
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 to ensure that the Fund's assets are invested in compliance with
the Subadvisory Agreement and the Fund's Registration Statement;
2. consult with and assist the Subadviser in maintaining appropriate
policies, procedures and records so that the Subadviser operates its
business and any investment program hereunder in compliance with
applicable laws;
3. establish and maintain periodic 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 matters relating to Fund promotion, marketing materials and the
Subadviser's reports to the Board.
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, as amended) to the Fund and/or the other accounts over
which the Adviser or its affiliates exercise investment discretion. The
Adviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund that is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if 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. 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
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<PAGE>
received.
VI. CONTROL BY THE BOARD OF DIRECTORS
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;
B. the provisions of the registration statement of the Company, as the
same may be amended from time to time, under the 1933 Act and the 1940
Act;
C. the provisions of the Company's Articles of Incorporation, as amended;
D. the provisions of the By-Laws of the Company, 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 Company, on behalf of the Fund, shall pay to the
Adviser an annual fee, payable monthly, equal to .50% 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
the annual advisory fee 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 as set forth above. Subject to the
provisions of Paragraph X hereof, payment of the Adviser's compensation for
the preceding month shall be made as promptly as possible. For so long as a
Subadvisory Agreement is in effect, the Company acknowledges on behalf of the
Fund 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
allocable 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 of those of
its personnel engaged in providing investment advice to the Fund,
including without limitation, office space, office equipment, telephone
and postage costs; and
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<PAGE>
2. Any fees and expenses of all directors of the Company who are employees
of the Adviser or an affiliated entity and any salaries and employment
benefits of officers of the Company who are affiliated persons of the
Adviser for acting as officers of the Company.
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 chargeable in connection with securities or other investment
transactions, 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 public accountants and
outside legal counsel;
4. Expenses of printing and distributing proxies, proxy statements,
prospectuses and reports to shareholders of the Fund, except as such
expenses may be borne by any distributor of the Fund;
5. Interest and taxes;
6. The fees and expenses of those of the Company's directors who are not
"interested persons" (as defined in the 1940 Act) of the Company or
the Adviser;
7. Shareholders' meeting expenses;
8. Administrator, transfer agent, custodian and dividend disbursing agent
fees and expenses;
9. Fees of dividend, accounting or pricing agents appointed by the Fund;
10. Fees payable by the Company to the SEC or in connection with the
registration of shares of the Fund under the laws of any state or
territory of the United States or of the District of Columbia;
11. Fees and assessments of the Investment Company Institute or any
successor organization or other association memberships approved by
the Board;
12. Such nonrecurring or extraordinary expenses as may arise, including
organizational expenses, litigation affecting the Fund and any
indemnification by the Company of its officers, directors or agents
with respect thereto;
13. All other ordinary business expenses incurred in the operations of the
Fund unless specifically provided otherwise in this paragraph IX;
14. All costs attributable to investor services, administering shareholder
accounts and handling shareholder relations (including, without
limitation, telephone and personnel expenses);
15. All expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares of the Fund or in cash;
and
16. Insurance premiums on property or personnel (including officers and
directors) of the Company which inure to its benefit.
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<PAGE>
X. EXPENSE LIMITATION
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 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 in order to
reduce such excess expenses, but 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 management 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 of Directors, 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
Company (including applicable office space, facilities and equipment) whose
normal duties consist of maintaining the financial accounts and books and
records of the Company and 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 Company or the Fund at the request of the Board.
XII. NON-EXCLUSIVITY
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 directors of the Company, and that
officers or directors of the Company may serve as officers or directors of
the Adviser to the extent permitted by law; and that the officers and
directors of the Adviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or
trust, including other investment companies.
C-2-6
<PAGE>
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 Company's directors 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 directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Company), by votes cast in
person at a meeting specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Company's directors 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 OF ADVISER AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or negligence on the part
of the Adviser or its officers, directors or employees, or reckless disregard
by the Adviser of its duties under this Agreement, the Adviser shall not be
liable to the Company or to any shareholder of the Company for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser or
any officer, director or employee of the Adviser, to the extent permitted by
applicable law, the Company hereby agrees to indemnify and hold the Adviser
harmless from and against all claims, actions, suits and proceedings at law
or in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating to the
sale, purchase, pledge of, advertisement of, or solicitation of sales or
purchases of any security (whether of the Fund or otherwise) by the Company,
its officers, directors, employees or agents in alleged violation of
applicable federal, state or foreign laws, rules or regulations.
C-2-7
<PAGE>
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Adviser and
that of the Company for this purpose shall be 151 Farmington Avenue,
Hartford, Connecticut 06156.
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 SEC 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
SEC, such provisions shall be deemed to incorporate the effect of such rule,
regulation or order.
XIX. SERVICE MARK
The service mark of the Company and the Fund and the name "Aetna" have
been adopted by the Company 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
Corporation 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 15th day of June,
1995.
Attest: AETNA GENERATION
PORTFOLIOS, INC.
on behalf of its Aetna Crossroads
Variable Portfolio series
/s/ Julie E. Rockmore By: /s/ Shaun P. Mathews
Name: Shaun P. Mathews
Title: President
Attest: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
/s/ Susan E. Schechter By: /s/ James C. Hamilton
Name: James C. Hamilton
Title: Vice President and Treasurer
C-2-8
<PAGE>
EXHIBIT C-3
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA GENERATION PORTFOLIOS, INC., a
Maryland corporation (the "Company"), on behalf of its Aetna Legacy Variable
Portfolio and AETNA LIFE INSURANCE AND ANNUITY COMPANY, a Connecticut
insurance corporation (the "Adviser"), as of the Date set forth below.
R E C I T A L
WHEREAS, the Company is registered as an open-end diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations promulgated thereunder;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engages
in the business of acting as an investment adviser;
WHEREAS, the Company has established the Aetna Legacy Variable Portfolio
(the "Fund");
WHEREAS, the Company, on behalf of 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, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
The Adviser is hereby appointed to serve as the investment adviser to the
Fund, to provide investment advisory services set forth below in Section II,
subject to the terms of this Agreement and the policies and control of the
Company's Board of Directors (the "Board"). The Adviser shall, for all
purposes herein, be deemed an independent contractor and shall have, unless
otherwise expressly provided or authorized, no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall provide the
following services:
A. supervise all aspects of the operations of the Fund;
B. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund's portfolio and whether concerning the individual issuers of the
securities included in the Fund's portfolio or the activities in which
the issuers engage, or with respect to securities that the Adviser
considers desirable for inclusion in the Fund's portfolio;
C. determine which issuers and securities shall be represented in the
Fund's portfolio and regularly report thereon to the Board;
D. formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report thereon to the
Board;
C-3-1
<PAGE>
E. 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 account of the Fund, in
relation to the matters contemplated by this Agreement; and
F. take, on behalf of the Fund, all actions which appear to the Company
and the Fund necessary to carry into effect the purchase and sale of
securities for the Fund and the supervisory functions listed above,
including the placing of orders for the purchase and sale of securities
for the Fund.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
Adviser hereby represents and warrants to the Company as follows:
1. Due Incorporation and Organization. The Adviser is duly organized and
is in good standing under the laws of the State of Connecticut and is
fully authorized to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser with
the Securities and Exchange Commission (the "SEC") 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 AND THE COMPANY
The Company, on behalf of the Fund, hereby represents and warrants to the
Adviser as follows:
1. Due Incorporation and Organization. The Company has been duly
incorporated under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its terms.
2. Registration. The Company is registered as an investment company with
the SEC 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 shall:
1. provide the Adviser with such economic research and securities analysis
as the Adviser may from time to time consider necessary or advisable in
connection with the Adviser's performance of its duties hereunder;
C-3-2
<PAGE>
2. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Fund, and whether concerning the individual issuers whose securities
are included in the Fund or the activities in which such issuers
engage, or with respect to securities that the Subadviser considers
desirable for inclusion in the Fund's investment portfolio;
3. determine which issuers and securities shall be purchased, sold or
exchanged by the Fund or otherwise represented in the Fund's investment
portfolio and regularly report thereon to the Adviser and, at the
request of the Adviser, to the Board; and
4. formulate and implement continuing programs for the purchase and sale
of the securities of such issuers and regularly report thereon to the
Adviser and, at the request of the Adviser, to the Board.
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 to ensure that the Fund's assets are invested in compliance with
the Subadvisory Agreement and the Fund's Registration Statement;
2. consult with and assist the Subadviser in maintaining appropriate
policies, procedures and records so that the Subadviser operates its
business and any investment program hereunder in compliance with
applicable laws;
3. establish and maintain periodic 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 matters relating to Fund promotion, marketing materials and the
Subadviser's reports to the Board.
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, as amended) to the Fund and/or the other accounts over
which the Adviser or its affiliates exercise investment discretion. The
Adviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund that is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if 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. 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
C-3-3
<PAGE>
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 DIRECTORS
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;
B. the provisions of the registration statement of the Company, as the
same may be amended from time to time, under the 1933 Act and the 1940
Act;
C. the provisions of the Company's Articles of Incorporation, as amended;
D. the provisions of the By-Laws of the Company, 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 Company, on behalf of the Fund, shall pay to the
Adviser an annual fee, payable monthly, equal to .25% 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
the annual advisory fee 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 as set forth above. Subject to the
provisions of Paragraph X hereof, payment of the Adviser's compensation for
the preceding month shall be made as promptly as possible. For so long as a
Subadvisory Agreement is in effect, the Company acknowledges on behalf of the
Fund 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
allocable 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 of those of
its personnel engaged in providing investment advice to the Fund,
including without limitation, office space, office equipment, telephone
and postage costs; and
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<PAGE>
2. Any fees and expenses of all directors of the Company who are employees
of the Adviser or an affiliated entity and any salaries and employment
benefits of officers of the Company who are affiliated persons of the
Adviser for acting as officers of the Company.
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 chargeable in connection with securities or other investment
transactions, 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 public accountants and
outside legal counsel;
4. Expenses of printing and distributing proxies, proxy statements,
prospectuses and reports to shareholders of the Fund, except as such
expenses may be borne by any distributor of the Fund;
5. Interest and taxes;
6. The fees and expenses of those of the Company's directors who are not
"interested persons" (as defined in the 1940 Act) of the Company or
the Adviser;
7. Shareholders' meeting expenses;
8. Administrator, transfer agent, custodian and dividend disbursing agent
fees and expenses;
9. Fees of dividend, accounting or pricing agents appointed by the Fund;
10. Fees payable by the Company to the SEC or in connection with the
registration of shares of the Fund under the laws of any state or
territory of the United States or of the District of Columbia;
11. Fees and assessments of the Investment Company Institute or any
successor organization or other association memberships approved by
the Board;
12. Such nonrecurring or extraordinary expenses as may arise, including
organizational expenses, litigation affecting the Fund and any
indemnification by the Company of its officers, directors or agents
with respect thereto;
13. All other ordinary business expenses incurred in the operations of the
Fund unless specifically provided otherwise in this paragraph IX;
14. All costs attributable to investor services, administering shareholder
accounts and handling shareholder relations (including, without
limitation, telephone and personnel expenses);
15. All expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in shares of the Fund or in cash;
and
16. Insurance premiums on property or personnel (including officers and
directors) of the Company which inure to its benefit.
C-3-5
<PAGE>
X. EXPENSE LIMITATION
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 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 in order to
reduce such excess expenses, but 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 management 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 of Directors, 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
Company (including applicable office space, facilities and equipment) whose
normal duties consist of maintaining the financial accounts and books and
records of the Company and 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 Company or the Fund at the request of the Board.
XII. NON-EXCLUSIVITY
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 directors of the Company, and that
officers or directors of the Company may serve as officers or directors of
the Adviser to the extent permitted by law; and that the officers and
directors of the Adviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or
trust, including other investment companies.
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<PAGE>
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 Company's directors 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 directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Company), by votes cast in
person at a meeting specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Company's directors 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 OF ADVISER AND INDEMNIFICATION
A. LIABILITY
In the absence of willful misfeasance, bad faith or negligence on the part
of the Adviser or its officers, directors or employees, or reckless disregard
by the Adviser of its duties under this Agreement, the Adviser shall not be
liable to the Company or to any shareholder of the Company for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser or
any officer, director or employee of the Adviser, to the extent permitted by
applicable law, the Company hereby agrees to indemnify and hold the Adviser
harmless from and against all claims, actions, suits and proceedings at law
or in equity, whether brought or asserted by a private party or a
governmental agency, instrumentality or entity of any kind, relating to the
sale, purchase, pledge of, advertisement of, or solicitation of sales or
purchases of any security (whether of the Fund or otherwise) by the Company,
its officers, directors, employees or agents in alleged violation of
applicable federal, state or foreign laws, rules or regulations.
C-3-7
<PAGE>
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of the Adviser and
that of the Company for this purpose shall be 151 Farmington Avenue,
Hartford, Connecticut 06156.
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 SEC 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
SEC, such provisions shall be deemed to incorporate the effect of such rule,
regulation or order.
XIX. SERVICE MARK
The service mark of the Company and the Fund and the name "Aetna" have
been adopted by the Company 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
Corporation 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 15th day of June,
1995.
Attest: AETNA GENERATION
PORTFOLIOS, INC.
on behalf of its Aetna Crossroads
Variable Portfolio series
/s/ Julie E. Rockmore By: /s/ Shaun P. Mathews
Name: Shaun P. Mathews
Title: President
Attest: AETNA LIFE INSURANCE AND
ANNUITY COMPANY
/s/ Susan E. Schechter By: /s/ James C. Hamilton
Name: James C. Hamilton
Title: Vice President and Treasurer
C-3-8
<PAGE>
Please refer to the Proxy Statement for a discussion of these matters. This
authorization card is solicited in connection with the special meeting of
shareholders of the Fund's Aetna Ascent Variable Portfolio to be held at 9:00
a.m., Eastern Standard Time, on June 17, 1996, and at any adjournment thereof.
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED, DIRECTS SHAUN P. MATHEWS AND
SUSAN E. BRYANT TO VOTE THE SHARES LISTED ON THE FRONT OF THIS CARD AS DIRECTED
AND REVOKES ALL PRIOR AUTHORIZATION CARDS.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [ ]
<TABLE>
<S> <C> <C> <C>
THE DIRECTORS RECOMMEND A VOTE FOR EACH OF THE FOLLOWING: FOR all WITHHOLD
1. Election of directors of the Fund nominees listed AUTHORITY
below (except as to vote for all
Morton Ehrlich Maria T. Fighetti David L. Grove Timothy A. Holt Daniel P. Kearney marked on the nominees
Sidney Koch Shaun P. Mathews Corine T. Norgaard Richard G. Scheide line below) listed
(INSTRUCTION: To withhold authority to vote for any individual nominee, write the [ ] [ ]
nominee's name on the line below)
_______________________________________________________________________________ FOR AGAINST ABSTAIN
2. Approve the Subadvisory Agreement. [ ] [ ] [ ]
3. Approve the New Investment Advisory Agreement. [ ] [ ] [ ]
</TABLE>
In their discretion, the proxies are authorized to vote upon such other
business, including any adjournment of the meeting, as may properly come before
the meeting.
031
<PAGE>
AETNA GENERATION PORTFOLIOS, INC. ("THE FUND")
AETNA ASCENT VARIABLE PORTFOLIO
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE FUND
This authorization card, when properly executed and returned, will be voted in
the manner directed herein by the undersigned. If no direction is made, this
authorization card will be voted FOR the election of the nominees named in this
authorization card and FOR approval of the other proposals.
Dated: _________________________, 1996
Please sign exactly as name appears on this card.
When account is joint tenants, all should sign. When
signing as administrator, trustee or guardian, please
give title. If a corporation or partnership, sign in
entity's name and by authorized person.
_____________________________________________________
Signature(s)
031
<PAGE>
Please refer to the Proxy Statement for a discussion of these matters. This
authorization card is solicited in connection with the special meeting of
shareholders of the Fund's Aetna Crossroads Variable Portfolio to be held at
9:00 a.m., Eastern Standard Time, on June 17, 1996, and at any adjournment
thereof. THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED, DIRECTS SHAUN P.
MATHEWS AND SUSAN E. BRYANT TO VOTE THE SHARES LISTED ON THE FRONT OF THIS CARD
AS DIRECTED AND REVOKES ALL PRIOR AUTHORIZATION CARDS.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [ ]
<TABLE>
<S> <C> <C> <C>
THE DIRECTORS RECOMMEND A VOTE FOR EACH OF THE FOLLOWING: FOR all WITHHOLD
1. Election of directors of the Fund nominees listed AUTHORITY
below (except as to vote for all
Morton Ehrlich Maria T. Fighetti David L. Grove Timothy A. Holt Daniel P. Kearney marked on the nominees
Sidney Koch Shaun P. Mathews Corine T. Norgaard Richard G. Scheide line below) listed
(INSTRUCTION: To withhold authority to vote for any individual nominee, write the [ ] [ ]
nominee's name on the line below)
_______________________________________________________________________________ FOR AGAINST ABSTAIN
2. Approve the Subadvisory Agreement. [ ] [ ] [ ]
3. Approve the New Investment Advisory Agreement. [ ] [ ] [ ]
</TABLE>
In their discretion, the proxies are authorized to vote upon such other
business, including any adjournment of the meeting, as may properly come before
the meeting.
032
<PAGE>
AETNA GENERATION PORTFOLIOS, INC. ("THE FUND")
AETNA CROSSROADS VARIABLE PORTFOLIO
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE FUND
This authorization card, when properly executed and returned, will be voted in
the manner directed herein by the undersigned. If no direction is made, this
authorization card will be voted FOR the election of the nominees named in this
authorization card and FOR approval of the other proposals.
Dated: _________________________, 1996
Please sign exactly as name appears on this card.
When account is joint tenants, all should sign. When
signing as administrator, trustee or guardian, please
give title. If a corporation or partnership, sign in
entity's name and by authorized person.
_____________________________________________________
Signature(s)
032
<PAGE>
Please refer to the Proxy Statement for a discussion of these matters. This
authorization card is solicited in connection with the special meeting of
shareholders of the Fund's Aetna Legacy Variable Portfolio to be held at 9:00
a.m., Eastern Standard Time, on June 17, 1996, and at any adjournment thereof.
THIS AUTHORIZATION CARD, WHEN PROPERLY EXECUTED, DIRECTS SHAUN P. MATHEWS AND
SUSAN E. BRYANT TO VOTE THE SHARES LISTED ON THE FRONT OF THIS CARD AS DIRECTED
AND REVOKES ALL PRIOR AUTHORIZATION CARDS.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. [ ]
<TABLE>
<S> <C> <C> <C>
THE DIRECTORS RECOMMEND A VOTE FOR EACH OF THE FOLLOWING: FOR all WITHHOLD
1. Election of directors of the Fund nominees listed AUTHORITY
below (except as to vote for all
Morton Ehrlich Maria T. Fighetti David L. Grove Timothy A. Holt Daniel P. Kearney marked on the nominees
Sidney Koch Shaun P. Mathews Corine T. Norgaard Richard G. Scheide line below) listed
(INSTRUCTION: To withhold authority to vote for any individual nominee, write the [ ] [ ]
nominee's name on the line below)
_______________________________________________________________________________ FOR AGAINST ABSTAIN
2. Approve the Subadvisory Agreement. [ ] [ ] [ ]
3. Approve the New Investment Advisory Agreement. [ ] [ ] [ ]
</TABLE>
In their discretion, the proxies are authorized to vote upon such other
business, including any adjournment of the meeting, as may properly come before
the meeting.
033
<PAGE>
AETNA GENERATION PORTFOLIOS, INC. ("THE FUND")
AETNA LEGACY VARIABLE PORTFOLIO
THIS AUTHORIZATION CARD IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE FUND
This authorization card, when properly executed and returned, will be voted in
the manner directed herein by the undersigned. If no direction is made, this
authorization card will be voted FOR the election of the nominees named in this
authorization card and FOR approval of the other proposals.
Dated: _________________________, 1996
Please sign exactly as name appears on this card.
When account is joint tenants, all should sign. When
signing as administrator, trustee or guardian, please
give title. If a corporation or partnership, sign in
entity's name and by authorized person.
_____________________________________________________
Signature(s)
033
