SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
THE AAL MUTUAL FUNDS
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[AAL Logo]
THE AAL MUTUAL FUNDS
222 West College Avenue
Appleton, Wisconsin 54919-0007
800-553-6319 or 920-734-7633
September ____, 1998
Dear Shareholder:
Re: Special Meeting of Shareholders
Enclosed is a notice of a Special Meeting of Shareholders of each
series of The AAL Mutual Funds (together the "Funds"), to be held on October 30,
1998, together with a Proxy Statement and Form of Proxy relating to the business
to be transacted at the meeting. This Special Meeting of Shareholders is being
called for the reasons listed below.
Election of Trustees; Selection of Accountants
Mr. D. W. Russler, who has served as a Trustee since 1992, has announced
his retirement effective December 31, 1998. I am sure all of our shareholders
join me and the other Trustees and management of the Funds as we extend our
gratitude to Mr. Russler for his dedicated service and wise guidance over the
years.
The Board of Trustees is asking the Shareholders of all of the Funds to
vote on the election of seven nominees for the Board of Trustees. Six of the
nominees are currently serving as Trustees. The seventh, Mr. Edward W. Smeds,
has been nominated to fill the vacancy that will be created with the retirement
of Mr. Russler on December 31, 1998. Mr. Russler will not stand for election.
Shareholders of all of the Funds also are being asked to ratify the
selection of PriceWaterhouseCoopers LLP as independent public accountants for
the fiscal year ending April 30, 1999. All shareholders of The AAL Mutual Funds
will vote together on the election of Trustees and the selection of accountants.
New Sub-Advisory Agreement for International Fund
The Board of Trustees is recommending that Societe Generale Asset
Management Corporation ("SoGen") be replaced as The AAL International Stock
Fund's Sub-Adviser by Oechsle International Advisers ("Oechsle"). Therefore, it
is necessary for the Shareholders of the International Fund to vote on the
approval of a new Sub-Advisory Agreement with Oechsle. The change from SoGen to
Oechsle is being proposed primarily for the following reasons:
1. The investment philosophy of the International Fund is to be fully
invested, except for cash needed for transactional purposes. The
investment style of SoGen has concentrated on smaller, less liquid
securities than many other mutual funds with similar objectives. The
supply of securities matching SoGen's focus has been limited. As a
result, the International Fund has maintained a larger proportion of
its assets in commercial paper and other short term instruments than
the Trustees believe is in the shareholders' best interests.
2. SoGen's investment performance as sub-adviser has consistently lagged
both the unmanaged Morgan Stanley Europe Australia Far East ("EAFE")
index as well as mutual funds with similar investment objectives.
3. Oechsle has proposed a sub-advisory fee which is significantly less
than the sub-advisory fee paid to SoGen. The International Fund's
investment adviser, AAL Capital Management Corporation, has agreed
that it will reduce its advisory fee under the International Fund's
investment advisory agreement in an amount corresponding to the
reduction in the sub-advisory fee proposed by Oechsle. Based upon the
International Fund's $151,578,627 in net assets as of July 31, 1998,
this reduction would save shareholders $278,157 annually, or an
overall reduction in sub-advisory fees of approximately one-third.
Oechsle is an independently owned money management organization primarily
focused on the management of investments in international securities. Oechsle
was organized in 1986 by a group of investment professionals, who previously
worked as a team at Putnam International Advisors. The founding partners of
Oechsle have worked together for an average of 15 years. The Board of Trustees
became familiar with Oechsle in Oechsle's role as sub-adviser to the AAL
Variable Product International Stock Portfolio, a series of AAL Variable Product
Series Fund, Inc. for which each of the Trustees, except for Mr. John H. Pender,
serves as a member of the Board of Directors. The Board of Trustees believes
that Oechsle's management style and philosophies are better suited to achieving
the International Fund's investment objective than are those of SoGen. Based on
the Board of Trustees' familiarity with and assessment of Oechsle's executive
personnel and portfolio managers, its administrative and investment operations,
its systems and procedures, its investment performance, the quality of its
services, and its financial condition, the Board of Trustees has a high degree
of confidence in Oechsle.
Amend Investment Objectives of Small Cap Stock and Mid Cap Stock Funds
The Board of Trustees is recommending a change to the fundamental
investment objectives of The AAL Small Cap Stock Fund and The AAL Mid Cap Stock
Fund. The proposed changes would eliminate from the fundamental investment
objective of each of these Funds the market capitalization thresholds used to
define small companies and mid-sized companies, respectively. These thresholds
would instead by introduced as nonfundamental investment policies, meaning they
could be changed in the future by the Board of Trustees without shareholder
approval. Only shareholders of these two Funds will vote, and they will vote
separately on this matter.
Since the inception of these Funds, the stock market has appreciated
greatly. Consequently, companies that are characterized as small or mid-size
have also grown. The threshold amounts contained in the fundamental investment
objectives of these Funds no longer accurately reflect the market perception of
what constitutes a small cap, versus a mid cap, or a large cap company.
The Board therefore is proposing to make the market capitalization
thresholds used to define small and mid-sized cap companies non-fundamental,
thereby permitting the Board of Trustees, without shareholder approval, to
adjust those thresholds from time to time in the future as necessary to reflect
market trends. At the same time, the Board of Trustees is proposing to increase
the market capitalization thresholds presently used to define small companies
and mid cap companies to increase the threshold amount for both Funds. The Board
believes future flexibility associated with this proposed change will enhance
the ability of the Funds to achieve their objectives in varying market
environments.
If you have any questions or concerns that you would like to discuss
about the meeting and the matters to be acted upon, please call us at
800-553-6319.
Thank you for your continued confidence in The AAL Mutual Funds. Your
cooperation and participation in completing and returning the enclosed proxy
will ensure that your vote is counted.
Very truly yours,
THE AAL MUTUAL FUNDS
Ronald G. Anderson, President
<PAGE>
THE AAL MUTUAL FUNDS
Appleton, Wisconsin 54919-0007
800-553-6319 or 920-734-7633
-----------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-----------------------------------
To Be Held on October 30, 1998
A Special Meeting of the Shareholders of The AAL Mutual Funds ("AAL
Trust"), including The AAL Small Cap Stock Fund, The AAL Mid Cap Stock Fund, The
AAL International Fund, The AAL Capital Growth Fund, The AAL Equity Income Fund,
The AAL Balanced Fund, The AAL High Yield Bond Fund, The AAL Bond Fund, The AAL
Municipal Bond Fund, The AAL Money Market Fund and The AAL U.S. Government Zero
Coupon Target Funds, Series 2001 and Series 2006 (together the "Funds"), will be
held at 222 West College Avenue, Appleton, Wisconsin 54919, on October 30, 1998,
beginning at 10:00 a.m. local time for the following purposes:
1. To vote on the election of seven nominees for the Board of Trustees;
2. To ratify the Board of Trustees' selection of PriceWaterhouseCoopers
LLP as independent public accountants for all of the Funds for the
fiscal year ending April 30, 1999;
3. To approve or disapprove, with respect to The AAL International Fund,
a new Sub-Advisory Agreement (the "Proposed Sub-Advisory Agreement")
by and among AAL Trust, AAL Capital Management Corporation, and
Oechsle International Advisers LLC ("Oechsle LLC"). A copy of the
Proposed Sub-Advisory Agreement is attached as Appendix A to the
accompanying Proxy Statement;
4. To approve or disapprove, with respect to The AAL Small Cap Stock
Fund, a change to the Fund's fundamental investment objective;
5. To approve or disapprove, with respect to The AAL Mid Cap Stock Fund,
a change to the Fund's investment objective; and
6. To transact such other business as properly may come before the
meeting or any adjournment thereof.
The Board of Trustees has fixed the close of business on August 31, 1998 as
the record date for determining shareholders entitled to notice of, and to vote
at, the Special Meeting and any adjournment thereof. Only shareholders of record
at the close of business on that date will be entitled to vote. Your attention
is invited to the Proxy Statement accompanying this Notice for a more complete
statement regarding the matters to be acted upon at the Special Meeting.
By Order of the Board of Trustees of
The AAL Mutual Funds
Robert G. Same, Secretary
Appleton, Wisconsin
September ____, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE PROVIDED FOR THAT PURPOSE.
<PAGE>
PROXY STATEMENT
THE AAL MUTUAL FUNDS
The AAL Small Cap Stock Fund
The AAL Mid Cap Stock Fund
The AAL International Fund
The AAL Capital Growth Fund
The AAL Equity Income Fund
The AAL Balanced Fund
The AAL High Yield Bond Fund
The AAL Municipal Bond Fund
The AAL Bond Fund
The AAL Money Market Fund
The AAL U.S. Government Zero Coupon Target Funds, Series 2001
The AAL U.S. Government Zero Coupon Target Funds, Series 2006
222 West College Avenue
Appleton, Wisconsin 54919-0007
1-800-553-6319 or 920-734-7633
This Proxy Statement was first mailed to
Shareholders on or about September ___, 1998
SOLICITATION AND VOTING
Solicitation
The enclosed Proxy is being solicited by the Board of Trustees of The
AAL Mutual Funds ("AAL Trust") in connection with the joint Special Meeting of
Shareholders of each of the Funds listed above (each a "Fund" and, collectively,
the "Funds") to be held on the day and at the time and location specified in the
Notice of Special Meeting to Shareholders and forms of proxy that accompany this
Proxy Statement (the "Special Meeting"). This joint Proxy Statement is being
used in order to reduce the preparation, printing, and postage expenses that
would result from the use of a separate Proxy Statement for each Fund and,
because many shareholders own shares of more than one Fund, to avoid burdening
shareholders with more than one Proxy Statement. Although some proposals
described herein relate to several or all of the Funds, shareholders of each
Fund will vote separately on each proposal on which shareholders of that Fund
are entitled to vote, and separate proxy cards are enclosed for each Fund in
respect of which a shareholder is a record owner of shares. You are encouraged
to read carefully the Proxy Statement and mark and return the proxy or proxies
accompanying it. The table below summarizes the proposals and how they apply to
the Funds.
- --- ----------------------------------------------- ----------------------------
PROPOSAL FUNDS AFFECTED
- --- ----------------------------------------------- ----------------------------
- --- ----------------------------------------------- ----------------------------
1. Election of Trustees All Funds
- --- ----------------------------------------------- ----------------------------
- --- ----------------------------------------------- ----------------------------
2. Ratification of Independent Accountants All Funds
- --- ----------------------------------------------- ----------------------------
- --- ----------------------------------------------- ----------------------------
3. Proposed Sub-Advisory Agreement The AAL International Fund
- --- ----------------------------------------------- ----------------------------
- --- ----------------------------------------------- ----------------------------
4. Investment Objective Change The AAL Small Cap Stock Fund
- --- ----------------------------------------------- ----------------------------
- --- ----------------------------------------------- ----------------------------
5. Investment Objective Change The AAL Mid Cap Stock Fund
- --- ----------------------------------------------- ----------------------------
Quorum and Voting
The presence at the Special Meeting, in person or by proxy, of
shareholders representing one-third of all shares outstanding and entitled to
vote on a matter constitutes a quorum for the transaction of business.
Abstentions will be counted as present for purposes of determining a quorum, but
will not be counted as votes cast with respect to any proposal. "Broker
non-votes" (i.e., proxies received from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote the shares on a particular matter with respect to which
the broker or the nominees do not have discretionary power), will be treated the
same as abstentions.
Shares represented by properly executed proxies received by AAL Trust
will be voted at the Special Meeting and any adjournment thereof in accordance
with the terms of such proxies. However, if no instructions are specified,
shares will be voted "FOR" Proposals 1, 2, 3, 4 and 5 and in the discretion of
the persons named in the proxy on Proposal 6. If a form of proxy withholds
authority to vote on Proposal 1 for any of the Trustees, the shares represented
thereby will be counted as votes cast against such Trustee(s). A shareholder may
revoke his or her proxy at any time prior to the voting thereof by filing a
written notice of revocation with the Secretary of AAL Trust prior to the
Special Meeting or by delivering a duly executed proxy bearing a later date.
The election of Trustees pursuant to Proposal 1 requires a plurality of
the votes cast by the holders of AAL Trust's outstanding shares, with all series
voting together. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as Trustees up to the maximum number of
Trustees to be chosen at the Special Meeting. Consequently, any shares not voted
(for example, abstentions) have no impact on the election of Trustees, except to
the extent that the failure to vote for an individual results in another
individual receiving a larger number of votes.
Ratification of PriceWaterhouseCoopers LLP to serve as independent
public accountants to AAL Trust pursuant to Proposal 2 requires that the number
of votes cast in favor of ratification must exceed the number of votes cast in
opposition to ratification. Accordingly, shares represented in person or by
proxy at the Special Meeting which are not voted (for example, abstentions) will
not affect the outcome of this proposal.
Approval of all other matters in this Proxy Statement requires the
affirmative vote of "a majority of the outstanding voting securities" of a Fund,
defined under the 1940 Act to mean at least a majority of the outstanding voting
shares of the affected Fund or, if less, 67% of the voting shares represented at
a meeting at which the holders of 50% or more of the outstanding voting shares
of that Fund are present or represented by proxy. Accordingly, abstentions and
broker non-votes will have the same effect as votes cast against approval of
these matters.
Shareholders of record of each of the Funds at the close of business on
August 31, 1998 will be entitled to one vote on each matter presented for each
share so held. At that date, the Funds had outstanding the following numbers of
shares:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------- -------------------------------------------
Fund No. of Outstanding Shares
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Small Cap Stock Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Mid Cap Stock Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL International Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Capital Growth Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Equity Income Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Balanced Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL High Yield Bond Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Bond Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Municipal Bond Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL Money Market Fund
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL U.S. Government Zero Coupon Target Funds, Series
2001
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
The AAL U.S. Government Zero Coupon Target Funds, Series
2006
- ------------------------------------------------------------- -------------------------------------------
- ------------------------------------------------------------- -------------------------------------------
TOTAL
- ------------------------------------------------------------- -------------------------------------------
</TABLE>
The Board of Trustees of AAL Trust knows of no business to be
considered at the Special Meeting other than the matters mentioned in the Notice
of Special Meeting. If any other matters are properly presented, it is the
intention of the persons named on the enclosed proxy to vote proxies in
accordance with their best judgment.
In the event a quorum is not present at the Special Meeting, or if a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
such Special Meeting to permit further solicitation of proxies, provided they
determine such an adjournment and additional solicitation is reasonable and in
the best interests of shareholders based on a consideration of all relevant
factors, including the nature of the relevant proposal, the percentage of votes
then cast, the percentage of negative votes then cast, the nature of the
proposed solicitation activities and the nature of the reasons for such further
solicitation. Adjournment with respect to any proposal would require the
affirmative vote of a majority of the votes cast on the question in person or by
proxy at the session of the Special Meeting to be adjourned. The persons named
as proxy would vote in favor of such adjournment those proxies which they are
entitled to vote in favor of such proposal. They would vote against any such
adjournment those proxies required to be voted against any such proposal.
A shareholder vote may be taken for one or more of the Funds on one or
more of the proposals in this Proxy Statement prior to any adjournment if
sufficient votes have been received for approval.
UPON REQUEST AND AT NO COST TO A REQUESTING SHAREHOLDER, AAL TRUST WILL MAIL, BY
FIRST CLASS MAIL, COPIES OF ITS ANNUAL REPORT DATED APRIL 30, 1998. REQUESTS
SHOULD BE DIRECTED TO THE ATTENTION OF ROBERT G. SAME, SECRETARY, AT THE AAL
MUTUAL FUNDS, 222 WEST COLLEGE AVENUE, APPLETON, WISCONSIN 54919-0007,
TELEPHONE: 1-800-553-6319.
PROPOSAL 1 - ELECTION OF TRUSTEES
Six of the seven presently serving members of the Board of Trustees are
standing for election as Trustees at the Special Meeting. Mr. D. W. Russler, who
is retiring effective December 31, 1998, will not stand for election. The Board
has nominated Mr. Edward W. Smeds to fill the vacancy that will be created with
the retirement of Mr. Russler. If elected, Mr. Smeds' term of office as a
Trustee would begin on January 1, 1999. It is the intention of the persons named
in the enclosed proxy to vote the shares represented thereby for the election of
these seven individuals unless otherwise specified by a shareholder on the
proxy. Should any of them become unable or unwilling to accept nomination or
election, the persons named in the proxy will exercise their voting power in
favor of such other person or persons as the Board of Trustees may recommend.
The following table sets forth information concerning the nominee Trustee and
the six Trustees standing for election.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Occupation and Trustee
Name of Trustee Age Business Experience Since
Nominee Trustee: 62 Retired; President, Customer Service and Operations, N/A
Edward W. Smeds Kraft Foods from 1991 to 1994; President Kraft Foods
10 Regent Road Canada from 1989 to 1990; Chairman, Board of
Northfield, IL 60093 Trustees, Carthage College.
Trustees Standing for Election:
F. Gregory Campbell 58 President of Carthage College, Kenosha, Wisconsin; 1992
2001 Alford Parks Dr. Vice Chairman, Kenosha Hospital and Medical Center;
Kenosha, WI 53140 Director, Evangelical lutheran Church in America
Risk Management/University and College Health;
Director, Johnson Mutual Funds; Director Kenosha
Area Development Association
John H. Pender* 68 Chairman of the Board of Trustees and from 1987 1987
P.O. Box 259 through 1996, President, AAL Trust; Prior to 1996,
Dunbar, WV 25064 Senior Vice President and Chief Investment Officer,
Aid Association for Lutherans (fraternal benefits
society); prior to 1992, Treasurer, Aid Association
for Lutherans, Trustee, Carthage College, Director,
Marjorie Merriweather Post Foundation
Richard L. Gady 55 Vice President, Public Affairs and Chief Economist, 1987
One Central Park Plaza ConAgra, Inc. (agribusiness).
Omaha, NE 68102
Lawrence M. Woods 66 Former Executive Vice President and Director, Mobil 1987
P.O. Box 1860 Oil Corp.; Director, Mobil Corp. (international oil
Worland, WY 82401 company and holding company) from 1976 through 1985.
John O. Gilbert* 56 President and Chief Executive Officer, Aid 1998
4321 North Ballard Road Association for Lutherans; Regent, Luther College;
Appleton, WI 54919 Director, Life Office Management Association, Inc.
Ronald G. Anderson* 49 President, AAL Trust; Senior Vice President and CFO, 1996
4321 North Ballard Road Aid Association for Lutherans; President AAL Capital
Appleton, WI 54919 Management Corporation; Director, General Re-CKAG
Reinsurance and Investment S.ar.L. (Luxembourg
Reinsurance Corporation); and from 1991 through
1996, Chairman, General Re Financial Products and
from 1995 through 1996, Vice President Corporate
Development, General Re (both reinsurance)
</TABLE>
- -------------------------------------
* Messrs. Pender, Gilbert and Anderson are "interested persons" of AAL Trust
as defined in the 1940 Act.
The Board of Trustees held four regular meetings and no special meeting
during the fiscal year ended April 30, 1998. Each Trustee attended all of the
meetings of the Board of Trustees, and of each committee thereof of which he is
a member. The Board of Trustees has a standing Audit Committee, none of whose
members is an "interested person" of AAL Trust as defined in the 1940 Act. The
Audit Committee reviews the internal and external accounting procedures of AAL
Trust and, among other things, considers the selection of independent public
accountants for each Fund of AAL Trust, approves all significant services
proposed to be performed by the independent certified public accountants and
considers the possible effect of such services on the accountant's independence.
The Audit Committee met once during the fiscal year ended April 30, 1998. Each
member of the Committee attended 100% of the meetings. The Board of Trustees has
established no other standing committees nor any policy or procedure regarding
the recommendation of Trustee nominees by shareholders, except that nomination
of the Trustees who are not "interested persons" of AAL Trust is required to be
made and approved by a majority of the Trustees who are themselves not
"interested persons" of AAL Trust.
AAL Trust makes no payments to any of its officers for services.
However, any of the Trustees who are not officers or employees of AAL Capital
Management Corporation ("AAL CMC") or of any of its affiliates are paid, by AAL
Trust, an annual fee of $25,000. These fees are assessed ratably to each series
of AAL Trust, including each of the Funds. Trustees are reimbursed by AAL Trust
for any expenses they may incur by reason of attending such meetings or in
connection with services they may perform for AAL Trust. The table below shows
compensation paid to any Trustee or officer of AAL Trust for the fiscal year
ended April 30, 1998.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Annual Compensation from
Capacities in Accrued During Benefits Upon AAL Trust and
Which AAL Trust's Retirement Fund Complex Paid
Remuneration Aggregate Last Fiscal to Trustee(1)
Name Received Remuneration Year
<S> <C> <C> <C> <C>
Richard L. Gady Trustee $19,500 -0- -0- $25,000
F. Gregory Trustee $19,500 -0- -0- $25,000
Campbell
D. W. Russler Trustee $19,500 -0- -0- $25,000
Lawrence M. Woods Trustee $19,500 -0- -0- $25,000
</TABLE>
- --------------------------------------
(1) The Fund Complex includes, in addition to AAL Trust, the AAL Variable
Product Series Fund, Inc.
Information regarding each Trustee's beneficial ownership of shares of
each series of AAL Trust is provided in the table included in the section of
this Proxy Statement captioned "Additional Information Principal Shareholders
and Certain Beneficial Owners."
The Board of Trustees of AAL Trust unanimously recommends a vote "FOR"
the election of the seven nominee Trustees named above.
PROPOSAL 2 - RATIFICATION OF INDEPENDENT ACCOUNTANTS
AAL Trust's Board of Trustees unanimously selected PriceWaterhouse
Coopers LLP, independent public accountants, to audit the books and records of
AAL Trust, including the books and records of each of the Funds, for the fiscal
year ending April 30, 1999. This firm has served AAL Trust as independent
auditors since its inception in 1987, and has served as auditors of each Fund
since their respective dates of commencement of operations.
PriceWaterhouseCoopers LLP has no direct or indirect financial interest in AAL
Trust except as auditors and independent public accountants. [No representative
of PriceWaterhouseCoopers LLP is expected to be present at the Special Meeting?]
The Board of Trustees recommends that shareholders ratify the selection
of PriceWaterhouseCoopers LLP as independent accountants for AAL Trust.
PROPOSAL 3 - APPROVAL OF NEW SUB-ADVISORY AGREEMENT FOR THE INTERNATIONAL FUND
Background
The Board of Trustees has determined that it is in the best interest of
the Shareholders of the International Fund to replace Societe Generale Asset
Management Corporation ("SoGen"), the Fund's current Sub-Adviser, with Oechsle
International Advisers, LLC, a Delaware limited liability company ("Oechsle
LLC"). Oechsle LLC is the proposed successor to Oechsle International Advisors
L.P. ("Oechsle L.P.") in the pending reorganization transaction described below
(the "Oechsle Reorganization"). Accordingly, the Board is recommending that the
Shareholders of the International Fund approve a new Sub-Advisory Agreement (the
"Proposed Sub-Advisory Agreement") among AAL Trust (on behalf of the
International Fund), AAL CMC and Oechsle LLC. The change is being made for the
reasons detailed below.
The investment philosophy of the International Fund is to be fully
invested, except for cash needed for transactional purposes. The investment
style of SoGen has concentrated on smaller issuers will less liquid securities
than many other mutual funds with similar objectives. The supply of securities
matching SoGen's focus has been limited. As a result, The AAL International Fund
has maintained a larger proportion of its assets in commercial paper and other
short term instruments than the Trustees believe is in the shareholders' best
interests.
SoGen's investment performance as sub-adviser has consistently lagged
both the unmanaged Morgan Stanley Europe Australia Far East ("EAFE") index as
well as mutual funds with similar investment objectives.
SoGen receives 0.55 of 1% of the International Fund's average daily net
assets as its sub-advisory fee. Oechsle's proposed sub-advisory fee is 0.40 of
1% of the Fund's first $50 million in average daily net assets, and 0.35 of 1%
of the Fund's average daily net assets in excess of $50 million. The Fund's
investment adviser, AAL Capital Management Corporation, has agreed that it will
reduce its advisory fee under the International Fund's investment advisory
agreement in an amount corresponding to the reduction in the subadvisory fee
proposed by Oechsle. Based upon the International Fund's $151,578,627 in net
assets as of July 31, 1998, this would save shareholders $278,157 annually, or
an overall reduction in sub-advisory fees of approximately one-third.
Oechsle L.P. is an independently owned money management organization
primarily focused on the management of investments in international securities.
The organization is a partnership formed and registered as an investment adviser
with the Securities and Exchange Commission in 1986 by a group of investment
professionals, who previously worked as a team at Putnam International Advisors.
The founding partners of Oechsle L.P. have worked together for an average of 15
years. As of August 31, 1998, Oechsle L.P. had under management in excess of $9
billion in assets. Oechsle L.P. serves as adviser or subadviser to seven (7)
other international mutual funds, including AAL Variable Product International
Stock Portfolio, a series of AAL Variable Product Series Funds, Inc. which
commenced operations on March 2, 1998.
In their capacities as members of the Board of Directors of AAL
Variable Product Series Funds, Inc., the members for the Board of Trustees have
thoroughly familiarized themselves with Oechsle L.P.'s investment strategies,
style, philosophy and overall performance. They also have had a first hand
opportunity to assess and work with Oechsle L.P.'s investment personnel, and to
observe the quality of their services, systems, procedures and financial
condition, as well as their performance. Based on this experience, the Board of
Trustees has concluded that the management style and philosophies of Oechsle
L.P. are more consistent with the investment objective and program of the
International Fund than those of SoGen, and has developed a high degree of
confidence in Oechsle L.P.
If approved, the Proposed Sub-Advisory Agreement would become effective
November 1, 1998.
Description of Present Sub-Advisory Agreement
AAL Capital Management Corporation, 222 West College Avenue, Appleton,
Wisconsin 54919, has served as investment adviser ("Adviser") for AAL Trust
since its inception in 1987, and as the Adviser for each of the Funds since the
respective dates of their commencement of operations. The Adviser provides these
services pursuant to the terms of an investment advisory agreement between the
Adviser and AAL Trust, dated November 28, 1990 (the "Present Advisory
Agreement"). It is contemplated that the change in the Sub-Adviser will result
in a fee reduction under the Advisory Agreement.
The Present Sub-Advisory Agreement was entered into by and among AAL
Trust, the Adviser and SoGen on May 23, 1995. Both the Advisory and the Present
Sub-Advisory Agreements were approved by the sole shareholder of the Fund on
July 31, 1995. The Advisory Agreement and Present Sub-Advisory Agreement for the
Fund provide that subject to Section 36 of the Investment Company Act of 1940,
neither the Adviser nor Sub-Adviser shall be liable to the Trust for any error
of judgment or mistake of law, or for any loss arising out of any investment or
for any act or omission in the management of the Trust and the performance of
their duties under the Agreement, except for willful misfeasance, bad faith or
negligence in the performance of their duties or by reason of reckless disregard
of their obligations and duties under the Agreements.
Under the Present Sub-Advisory Agreement, the Sub-Adviser, subject to
the direction and control of the Adviser and the Trustees of AAL Trust,
determines the securities that will be purchased or sold by the Fund, arranges
for their purchase and sale and renders other assistance to the Adviser in
formulating and implementing the investment program of the Fund. The Sub-Adviser
furnishes or pays for all facilities, equipment and supplies required for it to
carry out its duties under the Present Sub-Advisory Agreement including, but not
limited to, office space, office equipment, furnishings and personnel.
For its services the Sub-Adviser receives a fee from the fees paid to
the Adviser. The annual rate of the Sub-Advisory fee for the International Fund
is .055 of 1% of average daily net assets. For the fiscal year ended April 30,
1998, the Sub-Adviser received fees under the Present Sub-Advisory Agreement
with respect to the Fund in the amount of $930,467.
Unless earlier terminated as described below, the Present Sub-Advisory
Agreement provides that it will remain in effect from year to year only so long
as such continuance is specifically approved at least annually in the manner
required under the 1940 Act. The 1940 Act provides that the requisite approval
shall be deemed to have been obtained only if the Present Sub-Advisory Agreement
is specifically approved at least annually: (i) by the vote of a majority of the
Trustees who are not parties to the Present Sub-Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval; and (ii)
either by the vote of a majority of the entire Board of Trustees or by the vote
of the holders of a "majority" (as defined in the 1940 Act) of the outstanding
voting securities of the International Fund.
The Present Sub-Advisory Agreement may be terminated by the
Sub-Adviser, at any time without penalty upon giving AAL Trust and the Adviser
60 days' written notice, and may be terminated by AAL Trust or the Adviser, at
any time without penalty upon giving the Sub-Adviser 60 days' written notice,
provided that such termination by AAL Trust must be directed or approved by the
vote of a majority of all of its Trustees in office at the time or by the vote
of the holders of a "majority" (as defined in the 1940 Act) of the voting
securities of the International Fund. In addition, the Present Sub-Advisory
Agreement automatically terminates in the event of its "assignment" (as defined
in the 1940 Act) and in the event that the Advisory Agreement is terminated. In
the event of termination of the Present Sub-Advisory Agreement for any reason,
the approval of the shareholders of the International Fund is required to enter
into a new agreement with respect to the provision of sub-advisory services to
the International Fund.
On August 27, 1997 pursuant to the direction of the Board of Trustees, AAL CMC
delivered a written notice of termination of the Present Sub-Advisory Agreement
to SoGen. The termination is effective October 31, 1998 or such later date as
the shareholders approve the Proposed Sub-Advisory Agreement or other
arrangements are in place to assure continuous investment management services
legally can be provided on behalf of the International Fund. During this
pre-termination period SoGen and AAL CMC anticipate commencing the transition of
the International Fund's investment portfolio as described below under the
subheading "Adjustment to Investment Portfolio."
Description of Proposed Sub-Advisory Agreement
Under the Proposed Sub-Advisory Agreement, Oechsle LLC (as successor to
Oechsle L.P. in the Oechsle Reorganization described below), subject to the
direction and control of the Adviser and the Board of Trustees, would determine
the securities that would be purchased or sold by the International Fund, would
arrange for their purchase and sale and would render other assistance to the
Adviser in formulating and implementing the investment program of the
International Fund. Oechsle LLC would furnish or pay for all facilities,
equipment and supplies required for it to carry out its duties under the
Proposed Sub-Advisory Agreement, including, but not limited to, office space,
office equipment, furnishings and personnel. Under the Proposed Sub-Advisory
Agreement, Oechsle LLC would receive a fee, calculated daily and paid quarterly
out of the fee paid to the Adviser under the Advisory Agreement, at an annual
rate of 0.40 of 1% of the International Fund's average daily net assets of $50
million or less, and 0.35 of 1% of the International Fund's average daily net
assets over $50 million. The Advisor has agreed to reduce the fees under the
Advisory Agreement in an amount corresponding to the reduction in the
sub-advisory fee established under the Proposed Sub-Advisory Agreement as
compared to the sub-advisory fee presently charged by SoGen. Accordingly, the
cost savings associated with the fee proposed by Oechsle LLC would reduce the
overall advisory fees paid by the International Fund, and thereby would result
in a cost savings to the Fund and its shareholders.
Unless earlier terminated as described below, the Proposed Sub-Advisory
Agreement provides that it would remain in effect from year to year only so long
as such continuance is specifically approved at least annually in the manner
required under the 1940 Act. Approval of advisory and sub-advisory agreements
under the 1940 Act require the affirmative vote at least annually: (i) of a
majority of the Trustees who are not parties to the Proposed Sub-Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such party
cast in person at a meeting called for the purpose of voting on such approval;
and (ii) either of a majority of the entire Board of Trustees or of the holders
of a "majority" (as defined in the 1940 Act) of the outstanding voting
securities of the International Fund.
The Proposed Sub-Advisory Agreement could be terminated by the
Sub-Adviser at any time without penalty upon giving the Adviser and AAL Trust
sixty (60) days written notice, and by the AAL Trust or the Adviser at any time
without penalty upon giving the Sub-adviser sixty (60) days written notice,
provided that such termination by AAL Trust must be directed or approved by the
vote of a majority of all of its Trustees in office at the time or by the vote
of the holders of a "majority" (as defined in the 1940 Act) of the voting
securities of the International Fund.
Adjustment to Investment Portfolio
As noted above, Oechsle LLC's management style and philosophy focuses
on larger international companies than do the management style and philosophies
of SoGen. As a result, most of the equity and fixed income securities currently
in the International Fund ultimately will be sold with the proceeds reinvested
in securities of foreign companies that are larger and more liquid. Trading
costs associated with this process are estimated at .30% to .50% of the value of
securities traded, or $300,000 to $500,000 in the aggregate, based upon the
approximately $100 million in long-term investments in the International Fund.
Because some of the securities presently held in the International Fund do not
have an active trading market, (i.e. they are not bought and sold in large
numbers or at frequent times) we will attempt to sell them over a longer period
of time, from six months to 1 year. This will help minimize potential losses and
costs. As opportunities to liquidate some of these positions present themselves
over the next two months prior to the effectiveness of the termination of the
Present Sub-Advisory Agreement, SoGen and AAL CMC plan to commence the process
of restructuring the portfolio. Because the International Fund currently has
unrealized losses exceeding its unrealized gains, no adverse tax consequences
are anticipated for shareholders as a result of the sale of most of the
portfolio securities.
Approval Required
In order to be approved, the Proposed Sub-Advisory Agreement must
receive the affirmative vote of at least a majority of the outstanding shares of
the International Fund, or if less, 67% of the shares represented at a meeting
of shareholders at which the holders of 50% or more of the outstanding shares of
the International Fund are present or represented by proxy. If the Proposed
Sub-Advisory Agreement is approved, it will become effective and replace the
Present Sub-Advisory Agreement on November 1, 1998 and will continue in effect
for a period of two years, and thereafter from year to year, but only so long as
such continuance is specifically approved at least annually in the manner
described above for annual continuance of the Present Sub-Advisory Agreement.
See "Description of Present Sub-Advisory Agreement" above.
If the Proposed Sub-Advisory Agreement is not approved by the
shareholders of the International Fund, the Present Sub-Advisory Agreement will
continue, on a temporary basis, while the Trustees consider what course of
action to pursue with respect to the International Fund. Such course of action
could involve seeking to engage Oechsle to provide investment management
services on an interim basis (subject to any required regulatory action) during
the period required to obtain approval by shareholders of the Proposed
Sub-Advisory Agreement or another sub-advisory agreement with Oechsle, having
AAL CMC assume responsibilities for the management of the assets of the
International Fund pursuant to the Advisory Agreement, or seeking to make other
arrangements for obtaining such services from another source, as the Trustees
consider appropriate.
Information About Oechsle L.P.
Oechsle L.P. is a Delaware limited partnership, which is registered as an
investment adviser with the Securities and Exchange Commission. Its sole general
partner is Oechsle Group L.P., a Delaware limited partnership ("Oechsle Group
L.P."). Walter Oechsle, as Managing General Partner of Oechsle Group L.P., is
the chief executive officer of Oechsle, L.P. and Oechsle Group L.P. In addition
to Mr. Oechsle, the following persons are general partners of Oechsle Group
L.P.: S. Dewey Keesler, Jr., L. Sean Roche, Stephen P. Langer, Steven H.
Schaefer, Warren Walker and Andrew S. Parlin. The principal occupation of all of
the general partners of Oechsle Group L.P. is as a partner of Oechsle Group L.P.
and officer of Oechsle, L.P. The address of Oechsle, L.P., Oechsle Group L.P.
and each general partner of Oechsle Group L.P. is One International Place,
Boston, Massachusetts 02110.
Dresdner Asset Management (U.S.A.) Corporation ("DAMCO") currently owns
a majority limited partnership interest in Oechsle, L.P. DAMCO is a wholly owned
subsidiary of Dresdner Bank AG. DAMCO's address is 75 Wall Street, New York, New
York 10005. The address of Dresdner Bank AG is Jurgen-Ponto-Plarz 1 60301,
Frankfurt am Main, Germany.
Fund Managers
Kathleen Harris is a Partner and Portfolio Manager/Research
Analyst. She is a co-manager of the AAL Variable Product International Stock
Portfolio. Prior to joining Oechsle in January 1995, Ms. Harris was Portfolio
Manager and Investment Director for the State of Wisconsin Investment Board,
where she managed the fund's international equity assets. Previously, she was a
Fund Manager and Equity Analyst for the Northern Trust Company.
Ms. Harris received a M.B.A. in Finance from the University of Chicago
Graduate School of Business and a B.S. (Honors) in Finance from the University
of Illinois. She is a Chartered Financial Analyst.
L. Sean Roche is a Partner and a Portfolio Manager/Research
Analyst. Sean is a co-manager of the AAL Variable Product International Stock
Portfolio. He has over twenty-one years of international investment experience.
Prior to forming Oechsle, Mr. Roche was a Vice President and Portfolio Manager
for Putnam International Advisors. Previously, he was associated with Rowe Rudd
& Company and James Capel & Company in London, where he worked as a technology
analyst.
Mr. Roche holds a B.Sc. Econ. (Hons), the London School of Economics. He
studied investment analysis and management at the City University Business
School and the City of London Polytechnic.
Sub-Advisory Services. Oechsle L.P. acts as sub-adviser to several
other mutual funds that have investment objectives similar to the Fund's.
Appendix B attached hereto sets forth the name and asset size of these other
mutual funds and the rate of Oechsle L.P.'s compensation as sub-adviser to each
of them.
Services to be Rendered by Oechsle LLC to the Fund. Oechsle LLC, will
o Obtain and evaluate pertinent economic, statistical, financial and
other information affecting the economy generally and individual or
industries, the securities of which are included in the International
Fund or are under consideration for the inclusion in the Portfolio;
o Formulate and implement a continuous investment program for the
International Fund consistent with its investment objectives and
relevant investment policies as described in the prospectus;
o Take actions to implement the International Fund's investment program
by the purchase and sale of securities, including the placing of
orders for such purchases and sales; and
o Regularly report with respect to the implementation of the
International Fund's investment program.
Beyond the performance of these contractual services, Oechsle LLC is to
provide assistance in the marketing and client servicing of the Fund's
portfolio. In general, this assistance will take the form of meetings and
conference calls between one or more of Oechsle's investment staff with
wholesalers, brokers/dealers, and/or the clients of brokers/ dealers.
Oechsle Reorganization
Oechsle L.P. is currently changing its business structure. As part of the
change, Oechsle L.P. will be reorganized into Oechsle LLC, a Delaware limited
liability company, which will continue the business that Oechsle L.P. conducted
prior to that time. Oechsle L.P. expects this reorganization transaction will be
completed around October 1, 1998, subject to the satisfaction of several
conditions.
As part of the Oechsle Reorganization, (1) the seven general partners
of Oechsle Group L.P. will approximately double their current collective
ownership interest in the sub-adviser, (2) Dresdner Bank AG, indirectly Oechsle
L.P.'s largest limited partner, will divest of all of its interest in Oechsle
L.P., and (3) Fleet Financial Group, Inc. ("Fleet") will acquire approximately a
35% interest (on a fully diluted basis) in Oechsle LLC. Fleet's interest will be
nonvoting.
Oechsle LLC will be a Delaware limited liability company. Its Member
Manager will be Oechsle Group, LLC, a Delaware limited liability company
("Oechsle Group LLC") which will own approximately a 44% interest (on a fully
diluted basis) in Oechsle LLC. The seven current general partners of Oechsle
Group L.P. will collectively own approximately an 89% interest (on a fully
diluted basis) in Oechsle Group LLC. The management, policies and control of
Oechsle LLC will, subject to certain limitations, be vested exclusively in
Oechsle Group LLC. Day-to-day management of Oechsle LLC will be exercised by the
Management Committee of Oechsle Group LLC, which will consist of Messrs.
Keesler, Roche, Langer, Walker and Parlin. Mr. Keesler will be the Chief
Investment Officer of Oechsle LLC and a Portfolio Manager/Research Analyst with
responsibility for coordinating Oechsle LLC's investment activities. Mr. Langer
is a Member Manager and Director of Marketing. Messrs. Schaefer, Walker and
Parlin will be Portfolio Managers for Oechsle LLC.
The address of Oechsle LLC and Oechsle Group LLC is One International
Place, Boston, Massachusetts 02110. The address of Fleet is One Federal Street,
Boston, Massachusetts 02110.
Trustees' Considerations and Recommendation
In considering the Proposed Sub-Advisory Agreement, the Board of
Trustees carefully evaluated a number of relevant factors, including, in
addition to those discussed above (see "Background"): (1) a comparison of the
sub-advisory fees proposed Oechsle by LLC as compared to fees paid by other
international stock mutual funds for investment management services; (2) a
comparison of the fees and expense ratios (including advisory and sub-advisory
fees) of the International Fund to those of other international stock mutual
funds; (3) the historical performance of the International Fund compared to
relevant indices and its peer group; (4) the nature and quality of the services
that the Board of Trustees has observed Oechsle L.P. providing to the AAL
Variable Product International Stock Portfolio, both on their own merits and as
compared to similar services provided to the Fund by SoGen; (5) the long term
historical performance of Oechsle L.P.'s management style and philosophies with
respect to international stocks compared to relevant indices and peer groups;
(6) the history, reputation, qualification and background of Oechsle L.P., as
well as the qualification of its personnel and its financial condition; (7) the
investment performance record of the portfolio managers of Oechsle LLC who will
be responsible for managing the International Fund's assets; (8) the absence of
any special or inappropriate benefits that would be obtained by Oechsle LLC and
its affiliates from the relationship, including a consideration of soft dollar
arrangements; (9) an assessment that the Oechsle Reorganization will have no
material effect on the management, operations or personnel of Oechsle L.P. or
its investment style and philosophies with respect to international stocks; and
(10) other factors deemed relevant by the Board of Trustees.
Based upon these considerations, the Board has determined that it would
be in the best interests of the International Fund's shareholders to have
Oechsle LLC serve as the Fund's sub-adviser following the Oechsle
Reorganization. The Board of Trustees has further determined that the terms of
the Proposed Sub-Advisory Agreement are fair to, and in the best interests of,
the International Fund and its shareholders.
Accordingly, the Board of Trustees, none of whom is an "interested person" of
the Oechsle LLC or any of its affiliates, unanimously recommends that
shareholders of the International Fund vote "FOR" approval of the Proposed
Sub-Advisory Agreement.
PROPOSAL 4 - CHANGE IN INVESTMENT OBJECTIVE OF SMALL CAP STOCK FUND
The AAL Small Cap Stock Fund's ("Small Cap Fund's") current fundamental
investment objective seeks long-term capital growth by investing primarily in a
diversified portfolio of common stocks, and securities convertible into common
stocks, of small companies. For purposes of this objective, small companies are
defined as those with market capitalizations of less than $1.0 billion.
In recent years, stock prices have appreciated significantly and,
consequently, the size of smaller companies has increased as well. However,
because the market capitalization threshold that the Small Cap Fund uses to
define small companies is fundamentally fixed, the Fund has been unable to
increase the average size of the companies in which it invests. As a result, the
average size of the companies in which the Small Cap Fund invests has declined
relative to the overall market, and has exposed the Fund to increased price
volatility as compared to the market generally. This development has affected
the Small Cap Fund's performance relative to its peers, which have increased the
level of market capitalizations of companies in which they invest to correspond
to the market appreciation of stocks generally.
In order to provide more flexibility for the Small Cap Fund to respond
to such market changes in the future, the Board of Trustees is proposing to
eliminate the market capitalization threshold from the fundamental investment
objective of the Fund. At the same time, the Board of Trustees proposes to
establish a nonfundamental investment policy for the Small Cap Fund which will
define small companies to mean those with market capitalizations of less than
$1.5 billion, as compared to the current threshold of $1.0 billion. Because the
policy would be nonfundamental, the Board of Trustees could adjust this
threshold in the future as it deems necessary in response to market trends,
without shareholder approval. The Board of Trustees believes the flexibility
associated with this proposed change will enhance the ability of the investment
manager to achieve the Small Cap Fund's investment objective.
Accordingly, the Board of Trustees unanimously recommends that
shareholders of The AAL Small Cap Stock Fund vote "FOR" approval of the change
in the investment objective of the Fund.
PROPOSAL 5 - CHANGE IN INVESTMENT OBJECTIVE OF MID CAP STOCK FUND
The AAL Mid Cap Stock Fund's ("Mid Cap Fund's") current fundamental
investment objective seeks long-term capital growth by investing primarily in a
diversified portfolio of common stocks, and securities convertible into common
stocks, of mid-sized companies. For purposes of this objective, mid-sized
companies are defined as those with market capitalizations ranging from $100
million to $5.0 billion.
In recent years, stock prices have appreciated significantly and,
consequently, the size of mid-sized companies increased as well. However,
because the market capitalization threshold that the Mid Cap Stock Fund uses to
define mid-sized companies is fundamentally fixed, the Fund has been unable to
increase the average size of the companies in which it invests. As a result, the
average size of the companies in which the Fund invests has declined relative to
the overall market. This development has affected the Mid Cap Fund's performance
relative to its peers, which have increased the level of market capitalizations
of companies in which they invest correspond to the market appreciation of
stocks generally.
In order to provide more flexibility for the Mid Cap Fund to respond to
such market changes in the future, the Board of Trustees is proposing to
eliminate the market capitalization threshold from the fundamental investment
objective of the Fund. At the same time, the Board of Trustees proposes to
establish a nonfundamental investment policy for the Mid Cap Fund which will
define mid-sized companies to mean those with market capitalizations ranging
from $1.5 billion to $6 billion, as compared to the current threshold which
ranges from companies with $100 million in market capitalization to companies
with $5.0 billion. Because the policy would be nonfundamental, the Board of
Trustees could adjust this threshold in the future as it deems necessary in
response to market trends, without shareholder approval. The Board of Trustees
believes the flexibility associated with this proposed change will enhance the
ability of the investment manager to achieve the Mid Cap Fund's investment
objective.
Accordingly, the Board of Trustees unanimously recommends that
shareholders of The AAL Mid Cap Stock Fund vote "FOR" approval of the change in
the investment objective of the Fund.
OTHER BUSINESS
Management of AAL Trust is not aware of any other matters that will
come before the Special Meeting. However, if any other business should come
before the Special Meeting, your proxy, if signed and returned, will give
discretionary authority to the persons designated in it to vote according to
their best judgment on such matters.
ADDITIONAL INFORMATION
Officers of The AAL Mutual Funds
The following table sets forth information with respect to each officer
of AAL Trust who is not a Trustee. Officers are appointed annually by the Board
of Trustees, and serve one-year terms.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position and Offices
Name Age with The AAL Mutual Funds Principal Occupation
Robert G. Same 53 Secretary Director since 1987, Deputy
222 West College Ave. General Counsel, Aid
Appleton WI 54919 Association for Lutherans since
1998, Executive Vice President
since 1997 and Secretary of
AAL Capital Management
Corporation since 1987.
Terrance P. Gallagher 39 Treasurer Director and Chief Financial
222 West College Ave. Officer of AAL Capital
Appleton WI 54919 Management Corporation since
1994, Senior Vice President since
1987, and Controller since 1992.
</TABLE>
Administrator and Distributor
In addition to serving as Adviser to the Funds, AAL Capital Management
Corporation also provides necessary administrative services to each of the Funds
pursuant to its July 1, 1990 Administrative Services Agreement with AAL Trust,
and serves as the distributor of the shares of each Fund pursuant to its
Distribution Agreement with AAL Trust, dated June 15, 1987, as amended. AAL
Capital Management Corporation's principal executive offices are located at 222
West College Avenue, Appleton, Wisconsin 54919.
The Adviser was organized in 1986 as a Delaware corporation. It is a
wholly-owned subsidiary of AAL Holdings Inc., which in turn is a wholly-owned
subsidiary of Aid Association for Lutherans ("AAL"). AAL is a non-profit,
non-stock membership organization licensed to do business as a fraternal benefit
society in all states. AAL has approximately 1.7 million members and is the
world's largest fraternal benefit society in terms of assets and life insurance
in force. AAL ranks in the top 2% of all life insurers in the United States in
terms of ordinary life insurance (nearly $78 billion in force). AAL offers life,
health and disability income insurance and fixed and variable annuities to its
members. All members are part of one of over 9,800 local AAL branches throughout
the United States. AAL's principal executive offices are located at 4321 North
Ballard Road, Appleton, Wisconsin 54919.
Portfolio Transaction and Brokerage
The Sub-Adviser and the Adviser direct the placement of orders for the
purchase and sale of each Fund's portfolio securities. The costs of securities
transactions for each Fund consist primarily of brokerage commissions or dealer
or underwriter spreads. Bonds and money market instruments are generally traded
on a net basis and do not normally involve either brokerage commissions or
transfer taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the sellers who make
a market in the securities are dealt with directly unless better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. In placing portfolio transactions, the Sub-Adviser and the
Adviser seek the best combination of price and execution.
For the year ended April 30, 1998, the Funds paid brokerage commissions
in an aggregate amount of $3,143,251, none of which were paid to any
broker\dealer affiliated with the Adviser. Brokerage commissions in the amount
of $10,165 were paid to affiliates of the Sub-Adviser.
Principal Shareholders and Certain Beneficial Owners
As of August 31, 1998, the officers and Trustees of AAL Trust owned less
than 1% of the shares of each Fund. As of that date, the following persons were
the only individuals known to own of record or beneficially five percent (5%) or
more of the outstanding shares of any of the Funds or of AAL Trust:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name/Address Fund No. of Shares % of Outstanding
Ms. Geraldine J. McPhearson The AAL U.S. Government Zero
361 Bunker Hill Road Coupon Target Funds, Series
Belleville, Illinois 62221 2001
Jeffrey J. May and The AAL Government Zero Coupon
Norma J. May Target Funds, Series 2006
745 Pleasant View Road
Chanhassen, Minnesota 55317
</TABLE>
The table presented in Appendix C attached to this Proxy Statement
shows shares of each Fund of AAL Trust as to which each Trustee, the nominee
Trustee and the group consisting of all Trustees, the nominee Trustee and
executive officers of AAL Trust, had or shared power over voting or disposition
as of August 31, 1998.
Cost of Solicitation
In addition to this solicitation of proxies by use of the mails,
proxies may be solicited by officers of AAL Trust and by officers and employees
of the Adviser or the Sub-Adviser, personally or by telephone or telegraph,
without special compensation. Proxies may also be solicited by a professional
proxy solicitation service should management of AAL Trust determine that
solicitation by such means is advisable. The cost of preparing and mailing proxy
materials, of the Special Meeting, and of soliciting proxies will be borne by
the Funds.
Shareholder Meetings
AAL Trust is organized as a Massachusetts business trust, and as such
is subject to Massachusetts law. Pursuant to Massachusetts law and the
Declaration of Trust of AAL Trust, AAL Trust is not required to hold a
shareholder meeting in any year in which the election of Trustees, approval of
the investment advisory agreement (or any sub-advisory agreement) or
ratification of the selection of independent public accountants is not required
to be acted upon by shareholders of AAL Trust under the 1940 Act. Meetings of
the shareholders of AAL Trust will be held when and as determined necessary by
the Board of Trustees of AAL Trust and in accordance with the 1940 Act. Other
than the Special Meeting to which this Proxy Statement relates, AAL Trust
currently does not anticipate that it will hold a meeting of shareholders of any
of the Funds in 1998.
Shareholders who wish to present a proposal for action at the next meeting
or suggestions as to nominees for the Board of Trustees should submit the
proposal or suggestions to the following address: The AAL Mutual Funds, 222 West
College Avenue, Appleton, Wisconsin 54919, Attention: Robert G. Same, Secretary.
By Order of the Board of Trustees
Robert G. Same, Secretary
<PAGE>
Appleton, Wisconsin
September ____, 1998
THE AAL MUTUAL FUNDS
The AAL International Fund
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Ronald G. Anderson, James Abitz and Robert G.
Same, or any of them, proxy, with full power of substitution, to represent and
vote, as designated below, all shares of stock the undersigned is entitled to
vote at the Special Meeting of Shareholders of The International Fund to be held
at 222 West College Avenue, Appleton, Wisconsin 54919 beginning at 10:00 a.m.,
local time, on October 30, 1998, or at any adjournment thereof, with respect to
the matters set forth below and described in the accompanying Notice of Special
Meeting and Proxy Statement, receipt of which is hereby acknowledged.
DATED:__________________________________________, 1998
(Please sign exactly as name appears at left)
(If stock is owned by more than one person, all owners should sign. Persons
signing as executors, administrators, trustees or in similar capacities should
so indicate.)
* * * * *
Please place an "X" on the desired blank for each Item. Shares represented by
this proxy will be voted as directed by the shareholder.
IF NO DIRECTION IS SUPPLIED, THE PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4
and 5.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Proposal to elect seven candidates to serve on the Board of Trustees of __ FOR __ FOR, except vote __ WITHHELD from
The AAL Mutual Funds, six of whom presently are serving as Trustees, John H. withheld from the all candidates
Pender, Richard L. Gady, Lawrence M. Woods, F. Gregory Campbell, John O. Gilbert following candidate(s):
and Ronald G. Anderson, and the seventh of whom is a new nominee, Edward W.
Smeds.
2. Proposal to ratify the Board of Trustees' selection of PriceWaterhouse __ FOR __ AGAINST __ ABSTAIN
Coopers LLP as independent accountants for all of the Funds for the fiscal year
ending April 30,1999.
3. Proposal to approve the Proposed Sub-Advisory Agreement among The AAL __ FOR __ AGAINST __ ABSTAIN
Mutual Funds, AAL Capital Management Corporation and Oechsle International
Advisors, LLC, a copy of which is attached as Appendix A to the accompanying
Proxy Statement.
4. Proposal to approve the change in The AAL Small Cap Stock Fund's __ FOR __ AGAINST __ ABSTAIN
investment objective, as described in the accompanying Proxy Statement.
5. Proposal to approve the change in The AAL Mid Cap Stock Fund's investment __ FOR __ AGAINST __ ABSTAIN
objective, as described in the accompanying Proxy Statement.
6. In their discretion on such other matters as may properly come before the
meeting or any adjournment thereof.
</TABLE>
APPENDIX A
Form of New Sub-Advisory Agreement
THE AAL MUTUAL FUNDS
SUB-ADVISORY AGREEMENT FOR THE
AAL INTERNATIONAL FUND
WITH
OEECHSLE INTERNATIONAL ADVISORS, LLC
AGREEMENT made this 30th day of October, 1998, by and among the AAL MUTUAL
FUNDS. (the "Fund"), a Massachusetts business trust, AAL CAPITAL MANAGEMENT
CORPORATION (the "Adviser"), a Delaware corporation and OECHSLE INTERNATIONAL
ADVISORS, LLC (the "Sub-Adviser"), a Delaware limited liability corporation.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. In General
The Sub-Adviser agrees, as more fully set forth herein, to act as Sub-Adviser to
the Fund with respect to the investment and reinvestment of the assets of the
Fund's series of shares described as the AAL International Fund. It is
understood that the Fund may create one or more additional Fund series from time
to time and that this Agreement may be amended by the mutual written agreement
of the parties to include such additional funds under the terms to this
Agreement.
2. Duties and Obligations of the Sub-Adviser with Respect to Investment of
Assets of the International Fund
(a) Subject to the succeeding provisions of this section and subject to the
oversight and review of the Adviser and the direction and control of the Board
of Trustees ("Trustees") of the Fund, the Sub-Adviser, as agent and
attorney-in-fact with respect to the Fund, is authorized, in its discretion and
with prior consultation with the Fund to:
(i) Buy, sell, exchange, convert, lend and otherwise trade in any stocks, bonds,
currencies, and any other securities or assets;
(ii) Place orders and negotiate the commissions (if any) for the execution of
transactions in securities or other assets with or through such brokers,
dealers, underwriters or issuers as the Sub-Adviser may select; including
brokers and dealers that may be affiliates of the Sub-Adviser, and
(iii) Enter into and execute agreements on behalf of the Fund, relating to the
acquisition or disposition of investment assets and the execution of portfolio
transactions, including foreign exchange contracts and other transactional
agreements. Nothing contained herein, however, shall be deemed to authorize the
Sub-Adviser to take or receive physical possession of any cash or securities
held for the Fund, it being intended that sole responsibility for safekeeping
thereof and the consummation of all such purchases, sales, deliveries, and
investments made pursuant to the Sub-Adviser's direction shall rest upon the
Fund's Custodian.
(iv) Provide the Adviser and the Trustees with such reports as may reasonably be
requested in connection with the discharge of the foregoing responsibilities and
the discharge of the Adviser's responsibilities under the Investment Advisory
Agreement with the Fund and those of AAL Capital Management Corporation under
the Primary Underwriting Agreement with the Fund.
Written procedures with respect to (i), (ii) and (iii) above may be set forth as
agreed to among the Fund, the Adviser and Sub-Adviser.
(b) Any investment purchases or sales made by the Sub-Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by: (1) the provisions of the Investment Company Act of 1940 (the "Act")
and of any rules or regulations in force thereunder; (2) any other applicable
provisions of law; (3) the provisions of the Articles of Incorporation and
By-Laws of the Fund as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its Registration Statement under the Act,
or as amended by the shareholders of the Fund; provided that copies of the items
referred to in clauses (3), (4) and (5) shall have been furnished to the
Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties
("disabling conduct") hereunder on the part of the Sub-Adviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Sub-Adviser) the Sub-Adviser
shall not be subject to liability to the Fund or to any shareholder of the Fund
for any act or omission in the course of, or connected with rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36 (b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Fund shall indemnify the Sub-Adviser (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Sub-Adviser) against any liability arising from the
Sub-Adviser's conduct under this Agreement to the extent permitted by the
Articles of Incorporation and applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any "affiliated
person" (as defined in the Act) of the Sub-Adviser from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way limit or restrict the Sub-Adviser or any such affiliated person from
buying, selling or trading any securities for its or their own accounts or for
the accounts of others for whom it or they may be acting, provided, however,
that the Sub-Adviser expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Fund under this Agreement. It is agreed that the Sub-Adviser shall have
no responsibility or liability for the accuracy or completeness of the Fund's
Registration Statement under the Act and the Securities Act of 1933 except for
information supplied by the Sub-Adviser for inclusion therein. The Sub-Adviser
shall be deemed to be an independent contractor and, unless otherwise expressly
provided or authorized, have no authority to act or represent the Fund in any
way or otherwise be deemed an agent of the Fund.
(e) In connection with its duties to arrange for the purchase and sale of the
International Fund's securities and other assets, the Sub-Adviser shall follow
the principles set forth in any investment advisory agreement in effect from
time to time between the Fund and the Adviser, provided that a copy of any such
agreement shall have been provided to the Sub-Adviser. The Sub-Adviser will
promptly communicate to the Adviser and to the officers and the Trustees of the
Fund such information relating to portfolio transactions as they may reasonably
request.
(f) The Sub-Adviser may place orders both as to sales and purchases of assets
directly through any broker or dealer it chooses. Brokers or dealers may be
selected who provide brokerage and/or research services to the Fund and/or other
accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Brokers or dealers who execute portfolio transactions on behalf of
the Fund may receive commissions which are in excess of the amount of
commissions which other brokers or dealers would have charged for effecting such
transactions. In order to cause the Fund to pay such higher commissions, the
Sub-Adviser must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and/or research services provided by such
executing brokers or dealers viewed in terms of a particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other discretionary
client accounts.
(g) On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
The Sub-Adviser may purchase or sell for the Fund, pursuant to the Fund's Rule
10f-3 Procedures, any security (including securities of the same class as those
underwritten or other securities of the same or related issuer) for which any
affiliate of the Sub-Adviser acts as (1) an underwriter (either as lead
underwriter or syndicate member), both during the pendency of any underwriting
or selling syndicate and thereafter, or (2) a market maker, provided that such
security is purchased from a non-affiliated party.
(h) The Sub-Adviser shall be responsible for 13F reporting for the securities
held by the International Fund.
3. Allocation of Expenses
During the term of this Agreement, the Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities, commodities, and other investments (including brokerage
commissions and other transaction charges, if any) purchased for the Fund. The
Sub-Adviser agrees that it will furnish the Fund, at the Sub-Adviser's expense,
with all office space, facilities, equipment, and clerical personnel necessary
for carrying out its duties under this Agreement.
4. Certain Records
Any records required to be maintained and preserved pursuant to the provisions
of Rule 31a-1 and Rule 31a-2 under the Act that are prepared or maintained by
the Sub-Adviser on behalf of the Fund are the property of the Fund and will be
surrendered promptly to the Fund or Adviser on request.
5. Reference to the Sub-Adviser
Neither the Fund, the Adviser or any affiliate or agent thereof shall make
reference to or use the name of the Sub-Adviser or any of its affiliates in any
advertising or promotional materials without the prior approval of the
Sub-Adviser, which approval shall not be unreasonably withheld.
6. Compensation of the Sub-Adviser
The Adviser agrees to pay the Sub-Adviser and the Sub-Adviser agrees to accept
as full compensation for all services rendered by the Sub-Adviser as such, a
management fee, payable quarterly in arrears and computed on the average daily
net asset value of The AAL International Fund at rates shown on Exhibit A
attached hereto.
7. Duration and Termination
(a) This Agreement shall go into effect for the International Fund on November
1, 1998 or as soon thereafter as it receives shareholder approval, and shall,
unless terminated as hereinafter provided, continue in effect thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by a majority of the Fund's Board of Trustees, or by the vote of
the holders of a "majority" (as defined in the Act) of the outstanding voting
securities of the Fund, with respect to the International Fund, and, in either
case, a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in person at
a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated by the Sub-Adviser at any time without
penalty upon giving the Fund and the Adviser sixty (60) days' written notice
(which notice may be waived by the Fund and Adviser) and may be terminated by
the Fund or the Adviser at any time without penalty upon giving the Sub-Adviser
sixty (60) days' written notice (which notice may be waived by the Sub-Adviser),
provided that such termination by the Fund shall be directed or approved by the
vote of a majority of all of the Trustees in office at the time or by the vote
of the holders of a majority (as defined in the Act) of the voting securities of
the Fund, with respect to the International Fund, or with respect to any Fund by
the vote of a majority of the outstanding shares of such Fund. This Agreement
shall automatically terminate in the event of its "assignment" (as defined in
the Act). This Agreement will also terminate in the event that the Investment
Advisory Agreement is terminated.
8. Agreement Binding Only On Fund Property
The Sub-Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Fund personally, but bind only the Fund's
property; the Sub-Adviser represents that it has notice of the provisions of the
Fund's Articles of Incorporation disclaiming shareholder liability for acts or
obligations of the Fund.
9. Action By An Individual Fund
The provisions of this Agreement and any amendments hereto with respect to a
Series may be approved by the shareholders of that Series and become effective
with respect to the assets of that Series without the necessity of approval
thereof by shareholders of any other Series. The Adviser represents that the
holders of a majority (as defined in the "Act") of The AAL International Fund,
will vote on approval of the entry into this Agreement on behalf of said fund.
10. Notices
The Sub-Adviser agrees to promptly notify the Adviser of the occurrence of any
of the following events:
(a) any change in any of the Sub-Adviser's members or portfolio
managers;
(b) the Sub-Adviser fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Sub-Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
(c) the Sub-Adviser is the subject of any action, suit, proceeding, inquiry or
investigation at law or in equity, before any court, public board or body,
involving the affairs of the AAL International Fund, or
(d) any change in ownership or control, or membership of the Sub-Adviser.
11. Manner of Notice
Any notice given hereunder shall be in writing and may be served by being sent
by telex, facsimile or other electronic transmission, or sent by registered mail
or by courier to the address set forth below for the party for which it is
intended. A notice served by mail shall be deemed served seven days after
mailing and in the case of telex, facsimile or other electronic transmission,
twelve hours after confirmed receipt thereof. Addresses for notice may be
changed by written notice to the other party.
The Adviser
Ronald G. Anderson, President and Chief Executive Officer
AAL Capital Management Corporation
222 West College Ave.
Appleton, WI 54919-000&
Fax (920)
The Sub-Adviser
Stephen Langer
Oechsle International Advisors, LLC
One International Place
Boston, MA 02110
Fax (617) 330-8620
No provisions of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by both parties.
The Adviser acknowledges receipt of the Sub-Adviser's Part II, Form ADV at least
48 hours in advance of signing this Agreement.
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule, or otherwise, the remainder
of this Agreement shall not be affected thereby.
This Agreement shall be governed by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
THE AAL MUTUAL FUNDS
- -----------------------------------
Ronald G. Anderson, President
ATTEST:
- -----------------------------------
Robert G. Same, Secretary
AAL CAPITAL MANAGEMENT CORPORATION
- -----------------------------------
Ronald G. Anderson, President
ATTEST:
- -----------------------------------
Robert G. Same, Secretary
OECHSLE INTERNATIONAL
ADVISORS, LLC by its Managing
Member, OECHSLE GROUP, LLC
- -----------------------------------
L. Sean Roche, Member Manager
ATTEST
- -----------------------------------
EXHIBIT A
TO
THE AAL MUTUAL FUNDS
SUB-ADVISORY AGREEMENT
(Dated October 30, 1998)
1. The AAL International Fund
The management fee for The AAL International Fund, payable to the Sub-Adviser by
the Adviser, calculated in accordance with paragraph 6 of The AAL Mutual Funds
Sub-Advisory Agreement, shall be at the annual rate of :
0.40 of 1% of the average daily net assets of $50 million or less;
0.35 of 1% of the average daily net assets over $50 million.
<PAGE>
APPENDIX B
Oechsle International Advisors, L.P.
Mutual Fund Contract Renewal Information
Management Fee Schedules for Sub-Advisory Relationships:
AAL Variable Product International Stock Portfolio, a Portfolio of the AAL
Variable Product Series Fund, Inc.
Approximate
Assets Under Oechsle L.P.
Management as of Management Fee
3/31/98 from
Fee Schedule (millions) 1/1/98 - 3/31/98
1st $20 million.54% $11 $4,268
Next $30 million.45%
Over $50 million.36%
The International Equity Fund, a portfolio of the Galaxy Fund (Fleet Bank)
1st $50 million.40% $384 $304,264
Over $50 million.35%
The Jamestown International Equity Fund, a series of the Williamsburg Investment
Trust
All Assets.50% $42 $46,873
The MMA Praxis International Fund, a series portfolio of the MMA Praxis Mutual
Fund
All Assets.50% $22 $23,845
International Fund, a portfolio of Frank Russell Investment Company
1st $50 million.40% $209 $173,956
Next $600 million.35%
Over $650 million.30%
International Securities Fund, a portfolio of Frank Russell Investment Company
1st $50 million.40% $178 $148,409
Next $600 million.35%
Over $650 million.30%
International Equity Investments, a portfolio of Consulting Group Capital
Markets Funds, Ltd. (a Smith Barney managed fund)
All Assets.40% $626 $550,846
APPENDIX C
The table below shows shares of each Fund of AAL Trust as to which each
Trustee, the nominee Trustee and the group consisting of all Trustees, the
nominee Trustee and executive officers of AAL Trust had or shared power over
voting or disposition as of August 31, 1998.
Name and Series Number of Shares of the Fund(1)
John H. Pender:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
F. Gregory Campbell:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
Richard L. Gady:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
Lawrence M. Woods:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
D. W. Russler:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
Ronald G. Anderson:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
John O. Gilbert:
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
All Trustees and Executive Officers
as a Group (a total of 9 persons)
Small Cap Stock Fund
Mid Cap Stock Fund
International Fund
Capital Growth Fund
Equity Income Fund
Balanced Fund
High Yield Bond Fund
Bond Fund
Municipal Bond Fund
Money Market Fund
Target Fund, Series 2001
Target Fund, Series 2006
(1) These figures are based on information furnished by the respective
individuals and by Firstar Trust Company, AAL Trust's Transfer Agent, as of
August 31, 1998. Certain of the individuals listed share voting and investment
power with his spouse with respect to some or all of the shares listed opposite
his name. Each individual Trustee or executive officer beneficially owns less
than 1% of the shares of the Fund.
