Class A and Class B shares Registration No. 33-12911
As filed on June 25, 1998 Registration No. 811-5075
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 26
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 28
(Check appropriate box or boxes)
THE AAL MUTUAL FUNDS
(Exact name of registrant as specified in charter)
222 West College Ave.
Appleton, Wisconsin 54919-0007
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (414)734-5721
Robert G. Same
Secretary
The AAL Mutual Funds
222 West College Avenue
Appleton, WI 54919-0007
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box):
o immediately upon filing pursuant to paragraph (b) of Rule 485
X on July 1, 1998, pursuant to paragraph (b) of Rule 485
o 60 days after filing pursuant to paragraph (a)(1) of Rule 485
o on _______________, pursuant to paragraph (a)(1) of Rule 485
o 75 days after filing pursuant to paragraph (a)(2) of Rule 485
==========================================
Registrant has previously registered an indefinite number of its shares of
beneficial interest pursuant to Rule 24f-2 under the Investment Company Act of
1940. Registrant filed under Rule 24f-2 on June 24, 1997.
==========================================
Page 1 of pages ___.
Exhibit index is located at Page
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CROSS REFERENCE SHEET FOR
The AAL Mutual Funds
Class A and Class B shares
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N-1A Item No. Location
PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Prospectus Summary
Item 3 Financial Highlights The Funds' Financial Highlights
Item 4 General Description of Registrant Cover Page; Prospectus Summary and the Funds'
Investment Objectives and Investment Policies
Item 5 Management of the Fund Board of Trustees; and Management of the Trust
Item 5A Management's Discussion of Fund Performance Annual Report
Item 6 Capital Stock and Other Securities Organization and Description of Shares
Item 7 Purchase of Securities Being Offered Buying Class A and Class B Shares in the Funds;
Dividends, Distributions and Taxes; and Organization
and Description of Shares
Item 8 Redemption or Repurchase Selling (Redeeming) Your Class A and Class B Shares
Item 9 Pending Legal Proceedings Not Applicable
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of Contents
Item 12 General Information and History Not Applicable
Item 13 Investment Objectives and Policies Investment Objectives and Investment Policies;
Additional Investment Factors and Risks Regarding
the Funds; and Investment Restrictions
Item 14 Management of the Funds Investment Advisory Services; Distributor; and
Distribution Plan
Item 15 Control Persons and Principal Holders of Securities Investment Advisory Services
Item 16 Investment Advisory and Other Services Investment Advisory Services; Distributor; and
Distribution Plan
Item 17 Brokerage Allocation Portfolio Transactions
Item 18 Capital Stock and Other Securities General
Item 19 Purchase, Redemption and Pricing of Securities Being
Offered Purchases and Redemptions; Pricing Considerations
Item 20 Tax Status Tax Status, Dividends and
Distributions
Item 21 Underwriters Distributor
Item 22 Calculation of Performance Data Calculation of Yield and Total Return
Item 23 Financial Statements Financial Statements
PART C
Item 24 Information required to be included in Part C is set forth under
the appropriate Item, so numbered in Part C to this Registration
Statement
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THE AAL MUTUAL FUNDS
PROSPECTUS
Class A and Class B Shares
July 1, 1998
THE AAL MUTUAL FUNDS (the "Funds") are a series of separate mutual fund
portfolios within a single Trust, each with a specific investment objective. The
Funds offer investment opportunities to eligible Lutherans (including their
families and their enterprises) and to members and employees of Aid Association
for Lutherans ("AAL"). This prospectus describes Class A and Class B shares for
the following Funds:
Equity-Oriented Funds
- --------------------------------------------------------------------------------
THE AAL SMALL CAP STOCK FUND
Investing in Small Company Stocks
THE AAL MID CAP STOCK FUND
Investing in Mid-Sized Company Stocks
THE AAL INTERNATIONAL FUND
Investing in Foreign Stocks
THE AAL CAPITAL GROWTH FUND
Investing in Large Company Stocks
THE AAL EQUITY INCOME FUND
Investing in Income-Producing Equity Securities
THE AAL BALANCED FUND
Investing in Stocks, Bonds and Money Market Instruments
Income-Oriented Funds
- --------------------------------------------------------------------------------
THE AAL HIGH YIELD BOND FUND
Investing in Below Investment Grade Bonds
The AAL High Yield Bond Fund invests primarily in lower-rated bonds, commonly
known as "junk bonds." Junk bonds are subject to greater loss of principal and
interest. You should carefully assess the risks associated with an investment in
this Fund. See "The AAL High Yield Bond Fund - Investment Factors and the Risks
Involved."
THE AAL MUNICIPAL BOND FUND
Investing in Investment Grade Municipal Bonds
THE AAL BOND FUND
Investing in Investment Grade Bonds
THE AAL MONEY MARKET FUND
Investing in Money Market Instruments
The U.S. government neither insures nor guarantees your investment in The AAL
Money Market Fund. Also, we (The AAL Mutual Funds) do not give you any assurance
that we will be able to maintain a net asset value of $1.00 per share for the
Fund.
The prospectus sets forth concisely the information about the Fund's Class A and
Class B shares that you ought to know before investing. Read it carefully and
keep it for future reference. You can find more detailed information, including
investment policies, techniques, restrictions and the risks associated with
them, in the Statement of Additional Information ("SAI"), dated July 1, 1998.
The SAI has been filed with the Securities and Exchange Commission ("SEC"). The
SAI, along with the most recent AAL Mutual Funds Annual Report are incorporated
in this prospectus by reference (which means that it is legally considered part
of this prospectus even though you will not find it printed here). You can
obtain a copy of the SAI and a copy of the annual report free by calling
800-553-6319 or writing The AAL Mutual Funds at 222 West College Avenue,
Appleton, Wisconsin 54919-0007. The Telecommunications Device for the Deaf
("TDD") number is 800-684-3416. Institutional shares for the series in this
prospectus are described in a separate prospectus. In addition, The AAL U.S.
Government Zero Coupon Target Funds, Series 2001 and 2006 are described in a
separate prospectus and are closed to additional investments.
LIKE ALL MUTUAL FUND SHARES, NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAVE APPROVED OR DISAPPROVED THESE SECURITIES OR
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Table of Contents Page
Prospectus Summary
Reading the Prospectus
The AAL Small Cap Stock Fund
Expense Summaries and Example
Financial Highlights
The AAL Mid Cap Stock Fund
Expense Summaries and Example
Financial Highlights
The AAL International Fund
Expense Summaries and Example
Financial Highlights
The AAL Capital Growth Fund
Expense Summaries and Example
Financial Highlights
The AAL Equity Income Fund
Expense Summaries and Example
Financial Highlights
The AAL Balanced Fund
Expense Summaries and Example
Financial Highlights
The AAL High Yield Bond Fund
Expense Summaries and Example
Financial Highlights
The AAL Municipal Bond Fund
Expense Summaries and Example
Financial Highlights
The AAL Bond Fund
Expense Summaries and Example
Financial Highlights
The AAL Money Market Fund
Expense Summaries and Example
Financial Highlights
Additional Investment Factors and Risks Regarding the Funds
Risks of Investing in Foreign Securities
Investment Restrictions
Board of Trustees
Management of the Trust
Buying Class A and Class B Shares in the Funds
Additional Information about Buying Shares
Selling (Redeeming) Your Shares
Closing Small Accounts
Reinstatement Privilege
Exchange Privilege
Net Asset Value (NAV)
Dividends, Distributions and Taxes
Shareholder Maintenance Agreement
Yield and Performance Information
Transfer Agent, Custodians and
Independent Accountants
Organization and Description of Shares
Asset Allocation
Questions
Glossary of Important Terms
Appendix: Securities Ratings
Prospectus Summary
ORGANIZATION OF THE AAL MUTUAL FUNDS
AAL Capital Management Corporation ("AAL CMC"), which is a Delaware corporation
organized in 1986, is the investment adviser ("Adviser") and Distributor
("Distributor") for the Funds. As the Adviser, AAL CMC makes the investment
decisions for the Funds. As the Distributor, AAL CMC sells the Fund's shares to
investors. As of June 5, 1998, AAL CMC managed over $5.2 billion for the Funds.
AAL owns the outstanding stock in AAL CMC by holding the stock of AAL Holdings,
Inc. which holds all of the outstanding stock of CMC. AAL is a non-profit,
non-stock membership organization, licensed to do business as a fraternal
benefit society. AAL has a mission of bringing Lutherans and their families
together to pursue quality living through financial security, volunteer action
and help for others. AAL has over 1.7 million members and is one of the world's
largest fraternal benefit societies in terms of assets and life insurance in
force. AAL ranks in the top two percent of all life insurers in the U.S. in
terms of ordinary life insurance (nearly $82 billion in force). AAL offers life,
health and disability income insurance and fixed and variable annuities to its
members. Members belong to one of over 9,750 local AAL branches throughout the
U.S.
READING THE PROSPECTUS
References to "you" and "your" in the prospectus refer to prospective investors
or shareholders. References to "we," "us" or "our" refer to the Trust or the
Funds and Fund management (the Adviser (and/or Sub-Adviser for The AAL
International Fund), Distributor, Administrator, Transfer Agent and Custodians)
generally.
We have placed a glossary defining important terms at the end of this
prospectus. If you are unsure of the meaning of any term in the prospectus,
please check the glossary. We also have an Appendix to the prospectus that
describes the Nationally Recognized Statistical Rating Organizations ("NRSROs")
and their ratings for bonds and other debt and money market instruments. If you
are unsure of a rating as described in the prospectus, please refer to the
Appendix.
THE FUNDS
In the prospectus, we provide you with information on: the investment
objectives, policies and risks of investing in the Funds, how to buy and sell
Class A and Class B shares, management and services provided to the Funds and
other information. For more information on the Funds' risks, please remember to
read "Additional Investment Factors and Risks Involved" after reading the
separate Fund descriptions. The table on page three summarizes the Funds
available for your investment.
This prospectus describes two share classes, Class A shares and Class B shares.
You pay a sales charge immediately when you purchase Class A shares (front-end
sales charge). You pay a sales charge when you redeem Class B shares held for
less than five years (contingent deferred sales charge). In addition, you pay
higher "12b-1 fees" for Class B shares than Class A shares. 12b-1 fees are
ongoing asset based fees that we charge pursuant to a plan to cover the costs of
certain activities related to the distribution and service of the Funds' shares.
We also offer an institutional class of shares ("Institutional shares"). They
are described in a separate prospectus. Institutional shares are for Lutheran
organizations or enterprises with the minimum initial investment in the Funds of
$500,000. We designed Institutional shares to give Lutheran organizations and
enterprises (non-natural persons) or financial institutions acting in a
fiduciary or agency capacity for them a convenient means of accumulating an
interest in The AAL Mutual Funds. Lutheran organizations or enterprises that
invest in Institutional shares purchase shares at net asset value. They neither
pay initial sales charges, redemption fees nor "12b-1 distribution or service
fees." The performance of Class A, Class B and Institutional shares will vary
based on differences in sales charges and fees. For more information on the
Funds' Institutional shares and a prospectus, you may call the Mutual Funds
Service Center at 800-553-6319.
Whether you should purchase Class A or Class B shares depends on how long you
intend to own the shares and the size of your investment. If you intend to own
shares for more than five years and plan to invest less than $100,000, you
should consider Class B shares. If you may redeem shares in less than five years
or invest $100,000 or more, you should consider Class A shares. The following
table shows some of the differences between Class A and Class B shares:
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CLASS A SHARES CLASS B SHARES
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Maximum 4% front-end sales charge No front-end sales charge
No contingent deferred sales charge Maximum 5% contingent deferred sales charge
Lower annual expenses, which includes 12b-1 fees, Higher annual expenses, which includes 12b-1 fees,
than Class B shares than Class A shares
No conversion to Class B shares Automatic conversion to Class A shares after 5 years
- ---------------------------------------------------------------------------------------------------------------------------
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PRIMARY PRIMARY PRIMARY
OBJECTIVE INVESTMENTS RISKS*
THE AAL SMALL CAP STOCK FUND Long-Term Capital Small Company Stocks Financial and Market
Growth
THE AAL MID CAP STOCK FUND Long-Term Capital Mid-Sized Company Financial and Market
Growth Stocks
THE AAL INTERNATIONAL FUND Long-Term Capital Foreign Stocks Financial, Market and
Growth
Foreign Investment
THE AAL CAPITAL GROWTH FUND Long-Term Capital Large Company Stocks Financial and Market
Growth
THE AAL EQUITY INCOME FUND Current Income, Long- Income-Producing Financial, Market and
(formerly known as The AAL Term Income Growth Securities Interest Rate
Utilities Fund) and Capital Growth
THE AAL BALANCED FUND Long-Term Total Stocks, Bonds and Financial, Market,
Return Money Market Interest Rate and Credit
Instruments
THE AAL HIGH YIELD BOND FUND High Current Income Below Investment Interest Rate, Credit and
Secondarily Capital Grade Bonds Market
Growth
THE AAL MUNICIPAL BOND FUND Current Income Investment Grade Interest Rate and Credit
Exempt from Federal Municipal Bonds
Taxes Consistent with
Capital Preservation
THE AAL BOND FUND Current Income Investment Grade Bonds Interest Rate and Credit
Consistent with Capital
Preservation
THE AAL MONEY MARKET FUND Current Income Money Market Interest Rate and Credit
Consistent with Liquidity Instruments
and Capital Preservation
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*YOUR GUIDE TO RISK DISCLOSURE
Credit Risk Pages
Financial Risk. Pages
Foreign Investment Risk Page
Interest Rate Risk Pages
Market Risk Pages
The AAL Small Cap Stock Fund
INVESTMENT OBJECTIVE
The AAL Small Cap Stock Fund seeks long-term capital growth by investing
primarily in a diversified portfolio of common stocks, and securities
convertible into common stocks, of small companies. By small companies we mean
those with market capitalizations of less than $1 billion.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the Fund's total assets in
stocks, not including convertible securities, of small companies. Generally, we
focus on companies with market capitalizations ranging from $30 million to $600
million. Small companies tend to be substantially less-seasoned than companies
listed in the Standard & Poor's ("S&P(R)") 500 ("S&P 500") or the S&P(R) MidCap
400 Index. Small-cap companies trade in the over-the-counter market as well as
on U.S. securities exchanges.
We may invest the remaining 35% of the Fund's total assets in any combination of
additional small-cap stocks, larger-capitalization stocks and securities
convertible into such stocks. We look for small companies (including companies
initially offering their stocks to the public) that, in our opinion:
1) are in their early stages of development or positioned in new and emerging
industries;
2) have an opportunity for rapid growth;
3) have capable management; and
4) are financially sound.
Generally, the investing public does not know as much about or follow the stocks
of small-companies as compared to stocks of larger companies. As a result, small
company stocks may provide greater opportunities for long-term capital growth as
a result of the relative inefficiencies in the marketplace.
We tend to sell the stocks of companies when we think that other investments
offer better opportunities. This tendency may, from time to time, cause the Fund
to have short-term gains or losses.
ANNUAL ADVISORY FEE
. 0.75 of 1% on the first $200 million
. 0.65 of 1% on average daily net assets over $200 million
PORTFOLIO MANAGER
Kevin Schmitting, CFA, has managed the day-to-day Fund investments since its
inception on July 1, 1996. Mr. Schmitting also managed The AAL Mid Cap Stock
Fund from November 1, 1995, through March 17, 1997. Prior to November 1, 1995,
Mr. Schmitting served as investment director and in other investment capacities
for the State of Wisconsin Investment Board beginning in 1984 through October
1995.
INVESTMENT FACTORS AND RISKS INVOLVED
Financial Risk
Small, less-established companies may have relatively lower revenues, limited
product lines, lack of management depth and a lower share of the market for
their products or services than larger companies. Stocks of these companies
present a greater risk of losing value than stocks of larger, more established
companies.
Market Risk
Over time, the stock market tends to move in cycles, with periods when stock
prices rise generally and periods when stock prices decline generally.
Historically, small capitalization stocks have experienced more price volatility
than mid-size and large capitalization stocks. Some of the reasons they have
greater volatility include: 1) less certain growth prospects of small firms; 2)
lower degree of liquidity in the markets for such stocks; and 3) greater
sensitivity of small companies to changing economic conditions. As a result, the
value of the Fund's investments tends to increase and decrease substantially
more than the stock market in general, as measured by the S&P 500(R). You could
lose money investing in the Fund.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Small Cap Stock Fund.
Shareholder Transaction Expenses
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net
asset value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
Annual Fund Operating Expenses
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser,
12b-1distribution and service fees and other expenses for maintaining
shareholder records and furnishing shareholder services, statements and
financial reports. Operating expenses are expressed as a percentage of average
net assets for the fiscal year ended April 30, 1998.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.75% 0.75%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses 0.71% 0.85%
TOTAL FUND OPERATING
EXPENSES 1.71% 2.60%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $57 $77 $27
After 3 years $93 $112 $82
After 5 years $131 $140 $140
After 10 years $237 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Small Cap Stock Fund for the
periods shown. The information presented is based on a share of beneficial
interest outstanding throughout the applicable period. You should read the table
in conjunction with the Fund's financial statements and related notes, all of
which have been audited by the Fund's independent accountants, Price Waterhouse
LLP. At your request, we will provide you, without charge, a copy of The AAL
Mutual Funds Annual Report, dated April 30, 1998, containing these financial
statements and a more detailed discussion and analysis of the Fund's
performance.
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INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
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Class A shares
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Period from
01-Jul-96 to
30-Apr-97 $10.00 -$0.055 $0.162 $0.107 $0.000 -$0.267 -$0.267
Year ended
30-Apr-98 9.84 -0.101 4.726 4.625 0.000 -0.625 -0.625
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $11.17 -$0.032 -$1.328 -$1.360 $0.000 $0.000 $0.000
Year ended
30-Apr-98 9.81 -0.158 4.667 4.509 0.000 -0.589 -0.589
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
01-Jul-96 to
30-Apr-97 $9.84 -0.78% $ 44,487,852 2.06% -1.20% 138.50% $0.0590
Year ended
30-Apr-98 13.84 47.97% 120,285,342 1.71% -1.05% 105.60% 0.0570
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $9.81 -12.18% $ 3,394,082 3.20% -2.39% 138.50% $0.0590
Year ended
30-Apr-98 13.73 46.86% 14,389,944 2.60% -1.94% 105.60% 0.0570
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 2.06% and 1.71%.
Class B shares - Ratio of net operating expenses to average net assets (2): 3.21% and 2.60%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): (1.20)% and (1.05)%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): (2.40)% and (1.94)%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
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The AAL Mid Cap Stock Fund
INVESTMENT OBJECTIVE
The AAL Mid Cap Stock Fund 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. By mid-sized companies, we mean those
with market capitalizations ranging from $100 million to $5 billion.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the fund's total assets in
stocks, not including convertible securities, of mid-sized companies. Generally,
we focus on companies with market capitalizations ranging from $400 million to
$3.5 billion. Mid-sized companies tend to be smaller and less seasoned than
companies listed in the S&P 500(R). These companies may trade in the
over-the-counter market as well as on U.S. national securities exchanges.
We may invest the remaining 35% of the Fund's total assets in any combination of
additional mid-cap stocks, larger-capitalization stocks and securities
convertible into such stocks.
We look for mid-sized companies (including companies initially offering their
stocks to the public) that, in our opinion:
1) have prospects for growth in their sales and earnings;
2) are in an industry with a good economic outlook;
3) have higher quality management and more management depth than small
companies; and
4) have a strong financial position.
We usually pick companies in the middle stages of their development. These
companies tend to have established a record of profitability and possess a new
technology, unique product or market niche.
We tend to sell stocks of companies when we think other investments offer better
opportunities. Due to this policy, the Fund may from time to time have
short-term gains or losses.
ANNUAL ADVISORY FEE
. 0.75 of 1% on the first $200 million
. 0.65 of 1% on average daily net assets over $200 million
PORTFOLIO MANAGER
Michael R. Hochholzer, CFA, has managed the day-to-day Fund investments since
March 1997. Prior to managing the Fund, Mr. Hochholzer served as a securities
analyst and portfolio manager for Aid Association for Lutherans, the parent
company of AAL Capital Management Corporation from 1989.
INVESTMENT FACTORS AND RISKS INVOLVED
Financial Risk
Stocks of mid-sized companies may present a greater risk of losing value than
stocks of larger, more established companies, but may present less risk than
stocks of smaller companies. Mid-sized companies tend to have relatively smaller
revenues, narrower product lines, less management depth and smaller shares of
the market for their products or services than large companies.
Market Risk
Over time, the stock market tends to move in cycles, with periods when stock
prices rise generally and periods when stock prices decline generally. Due to
the tendency for mid cap stocks to have less liquidity in the market than large
company stocks, the value of the Fund's investments might increase and decrease
more than the stock market in general, as measured by the S&P 500(R). You could
lose money investing in the Fund.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Mid Cap Stock Fund.
Shareholder Transaction Expenses
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
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Annual Fund Operating Expenses
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.68% 0.68%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses 0.37% 0.65%
TOTAL FUND
OPERATING EXPENSES 1.30% 2.33%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $53 $74 $24
After 3 years $80 $104 $74
After 5 years $110 $126 $126
After 10 years $193 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Mid Cap Stock Fund for the periods
shown. The information presented is based on a share of beneficial interest
outstanding throughout the applicable period. You should read the table in
conjunction with the Fund's financial statements and related notes, all of which
have been audited by the Fund's independent accountants, Price Waterhouse LLP.
At your request, we will provide you, without charge, a copy of The AAL Mutual
Funds Annual Report, dated April 30, 1998, containing these financial statements
and a more detailed discussion and analysis of the Fund's performance.
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INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
30-Jun-93 to
30-Apr-94 $10.00 -$0.044 $0.424 $0.380 $0.000 $0.000 $0.000
Years ended
30-Apr-95 10.38 -0.054 0.594 0.540 0.000 0.000 0.000
30-Apr-96 10.92 -0.100 6.290 6.190 0.000 0.000 0.000
30-Apr-97 17.11 -0.119 -1.628 -1.747 0.000 -2.653 -2.653
30-Apr-98 12.71 -0.037 4.743 4.706 0.000 -1.486 -1.486
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $13.67 -$0.026 -$0.954 -$0.980 $0.000 $0.000 $0.000
Year ended
30-Apr-98 12.69 -0.123 4.656 4.533 0.000 -1.443 -1.443
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
30-Jun-93 to
30-Apr-94 $10.38 3.80% $142,529,469 1.72% -1.14% 55.49% $
Years ended
30-Apr-95 10.92 5.20% 20,792,070 1.54% -0.77% 88.18%
30-Apr-96 17.11 56.59% 424,974,829 1.39% -0.82% 90.14% 0.0550
30-Apr-97 12.71 -11.08% 461,732,660 1.35% -0.94% 112.60% 0.0600
30-Apr-98 15.93 38.73% 671,479,580 1.30% -0.27% 104.73% 0.0600
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $12.69 -7.17% $ 3,270,870 2.29% -1.41% 112.60% $0.0600
Year ended
30-Apr-98 15.78 37.41% 13,555,367 2.33% -1.30% 104.73% 0.0600
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets(2): 1.73%, 1.54%, 1.39%, 1.35%, and 1.30%.
Class B shares - Ratio of net operating expenses to average net assets (2): 2.29% and 2.33%.
Class A shares - Ratio of net investment income (Loss) to average net assets (2): (1.14)%, (0.77)%, (0.82)%, (0.94)% and (0.27)%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): (1.41)% and (1.30)%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
</TABLE>
The AAL International Fund
INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth by investing primarily in a diversified
portfolio of foreign stocks.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the fund's total assets in
foreign stocks primarily traded in at least three countries, not including the
United States. We may not invest more than 25% of the Fund's assets in any one
country. We do not have any other limitations on how much of its assets it may
invest in securities primarily traded in any one country.
We focus on stocks primarily trading in the United Kingdom, Western Europe,
Australia, Far East, Latin America and Canada. Many of these markets are mature,
while others are emerging (for example, Indonesia and Argentina). We do not have
any limits on the extent to which we can invest in either mature or emerging
markets. We may invest up to 100% of the Fund's total assets in emerging
markets. We have listed the countries and their classifications as mature or
emerging in the Statement of Additional Information. From time to time, we may
invest in securities trading in other countries not listed here or in the
Statement of Additional Information.
Typically, we consider an issuer as domiciled in a particular country if it:
1) is incorporated under the laws of that country;
2) has at least 50% of the value of its assets located in that country; or
3) derives at least 50% of its income from operations or sales in that
country.
For issuers that do not meet the above domicile criterion, we make a good-faith
determination based on such factors as the location of issuer's assets,
personnel, sales and earnings.
We may invest the remaining 35% of the Fund's total assets in: additional
foreign stocks; U.S. stocks; structured notes and/or preferred stocks; and up to
20% of the Fund's total assets in U.S. and foreign bonds and other debt
obligations, including lower-rated debt, commonly referred to as "junk bonds"
(i.e., securities rated BB or lower by S&P or Ba or lower by Moody's Investor
Services, Inc. ("Moody's")) and unrated securities.
We do not place any restrictions on the debt ratings of securities acquired or
the portion of the Fund's assets we may invest in a particular rating category
for the Fund.
Pending the investment of cash from new sales or to meet ordinary daily cash
needs, we may hold cash temporarily (U.S. dollars, foreign currencies or
multinational foreign currency units) for the Fund. We may invest any portion of
the Fund's total assets in money market instruments.
ANNUAL ADVISORY FEE
. 0.80 of 1% on average daily net assets
ANNUAL SUB-ADVISORY FEE
. 0.55 of 1% on average daily net assets (payable from the 0.80% Annual
Advisory Fee paid to the Adviser)
SUB-ADVISER
We have hired a sub-adviser ("Sub-Adviser"), Societe Generale Asset Management
Corp. ("SoGen"), who, under our direction and control, makes the day-to-day
investment decisions for the Fund. SoGen, 1221 Avenue of the Americas, New York,
NY 10020, is a registered investment adviser that is indirectly owned by Societe
Generale, one of France's largest banks. Under the Sub-Advisory Agreement, the
Sub-Adviser for the Fund, subject to our (the Adviser and Board of Trustees for
the Fund) direction and control determines which securities to purchase and sell
for the Fund, arranges the purchases and sales for the Fund, and renders other
assistance to us in formulating and implementing the investment program for the
Fund.
PORTFOLIO MANAGER
Jean-Marie Eveillard has managed the day-to-day Fund investments since its
inception on August 1, 1995. Mr. Eveillard has served as SoGen's President and
Director since April 1990.
INVESTMENT FACTORS AND RISKS INVOLVED
Foreign Investment Risk
In addition to the risks of investing in stocks of different sized companies, as
highlighted in our other stock fund offerings (financial and market risks),
investors face particular risks associated with foreign investing. Foreign
investment risks include currency, liquidity, political, economic and market
risks, as well as risks associated with governmental regulation and non-uniform
corporate disclosure standards. We may invest from 0% to 100% of the Fund's net
assets in emerging growth countries, which may entail more risk than investing
in mature countries. The greater the percentage of net assets the Fund invests
in emerging countries, the greater the risks to your investment. You may lose
money investing in this Fund.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL International Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy, sell or hold
shares of the Fund. For Class A shares, we based expenses on the maximum 4%
sales charge, which is reduced on purchases of $25,000 or more. For Class B
shares, we based expenses on the maximum 5% contingent deferred sales charge,
which is reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSE A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of the Fund's average net
assets for the fiscal year ended April 30, 1998. On December 1, 1997, we reduced
the advisory fee for this Fund.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.80% 0.80%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses 0.86% 1.10%
TOTAL FUND OPERATING
EXPENSES 1.91% 2.90%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $59 $80 $30
After 3 years $98 $121 $91
After 5 years $141 $154 $154
After 10 years $258 N/A* N/A*
*Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL International Fund for the periods
shown. The information presented is based on a share of beneficial interest
outstanding throughout the applicable period. You should read the table in
conjunction with the fund's financial statements and related notes, all of which
have been audited by the Fund's independent accountants, Price Waterhouse LLP.
At your request, we will provide you, without charge, a copy of The AAL Mutual
Funds Annual Report, dated April 30, 1998, containing these financial statements
and a more detailed discussion and analysis of the Fund's performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
01-Aug-95 to
30-Apr-96 $10.00 $0.046 $1.058 $1.104 -$0.024 $0.000 -$0.024
Years ended
30-Apr-97 11.08 0.005 0.680 0.685 -0.335 -0.060 -0.395
30-Apr-98 11.37 0.168 0.564 0.732 -0.375 -0.577 -0.952
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $10.98 $0.000 $0.360 $0.360 $0.000 $0.000 $0.000
Year ended
30-Apr-98 11.34 0.126 0.494 0.620 -0.333 -0.577 -0.910
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
01-Aug-95 to
30-Apr-96 $11.08 11.07% $ 57,117,185 2.15% 0.94% 1.30% $0.0180
Years ended
30-Apr-97 11.37 6.32% 116,153,782 2.10% 0.88% 12.95% 0.0130
30-Apr-98 11.15 7.34% 144,152,707 1.91% 1.36% 19.90% 0.0090
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $11.34 3.28% $2,599,958 2.94% -0.03% 12.95% $0.0130
Year ended
30-Apr-98 11.05 6.30% 7,910,025 2.90% 0.34% 19.90% 0.0090
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 2.32%, 2.10% and 1.91%.
Class B shares - Ratio of net operating expenses to average net assets (2): 2.94% and 2.90%.
Class A shares - Ratio of net investment income (loss) to average net assets(2): 0.77%, 0.88% and 1.36%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): (0.03)% and 0.34%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
</TABLE>
The AAL Capital Growth Fund
INVESTMENT OBJECTIVE
The AAL Capital Growth Fund seeks long-term capital growth by investing
primarily in a diversified portfolio of common stocks and securities convertible
into common stocks.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the Fund's total assets in
common stocks, not including convertible securities. Generally, we focus on
dividend-paying stocks issued by companies with earnings growth per share higher
than earnings growth per share of the S&P 500(R). In selecting stocks, we look
for quality, operating growth predictability and financial strength.
We may invest the remaining 35% of the Fund's total assets in additional common
stocks, preferred stocks and bonds. The Fund does not invest in bonds for
capital growth or for long time periods. We limit our investments in convertible
securities to no more than 5% of the Fund's net assets.
ANNUAL ADVISORY FEE
. 0.70 of 1% on the first $250 million
. 0.65 of 1% on the next $250 million
. 0.575 of 1% on the next $500 million
. 0.50 of 1% on average daily net assets over $1 billion
PORTFOLIO MANAGER
Frederick L. Plautz has managed the day-to-day Fund investments since November
1, 1995. Prior to managing the Fund, Mr. Plautz served as vice president and
portfolio manager for Federated Investors from 1990 through October 1995.
INVESTMENT FACTORS AND RISKS INVOLVED
Financial Risk
Many factors affect an individual company's performance, such as management or
the demand for a company's products or services and company performance affects
the value of stocks in the Fund's portfolio.
Market Risk
Over time, the stock market tends to move in cycles, with periods when stock
prices rise generally and periods when stock prices decline generally. The value
of the Fund's investments may increase and decrease more than the stock market
in general, as measured by the S&P 500(R). You could lose money investing in the
Fund.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Capital Growth Fund.
Shareholder Transaction Expenses
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.55% 0.55%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses . 0.18% 0.35%
TOTAL FUND OPERATING
EXPENSES 0.98% 1.90%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $50 $70 $20
After 3 years $71 $91 $61
After 5 years $93 $104 $104
After 10 years $158 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Capital Growth Fund for the
periods shown. The information presented is based on a share of beneficial
interest outstanding throughout the applicable period. You should read the table
in conjunction with the Fund's financial statements and related notes, all of
which have been audited by the Fund's independent accountants, Price Waterhouse
LLP. At your request, we will provide you, without charge, a copy of The AAL
Mutual Funds Annual Report, dated April 30, 1998, containing these financial
statements and a more detailed discussion and analysis of the Fund's
performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
16-Jul-87 to
30-Apr-88 $10.00 $0.112 -$1.709 -$1.597 -$0.043 $0.000 -$0.043
Years ended
30-Apr-89 8.36 0.218 1.466 1.684 -0.204 0.000 -0.204
30-Apr-90 9.84 0.233 0.889 1.122 -0.242 0.000 -0.242
30-Apr-91 10.72 0.271 1.726 1.997 -0.269 -0.028 -0.297
30-Apr-92 12.42 0.276 1.659 1.935 -0.280 -0.015 -0.295
30-Apr-93 14.06 0.284 0.761 1.045 -0.274 -0.001 -0.275
30-Apr-94 14.83 0.296 -0.287 0.009 -0.286 -0.063 -0.349
30-Apr-95 14.49 0.274 1.699 1.973 -0.298 -0.605 -0.903
30-Apr-96 15.56 0.201 3.756 3.957 -0.217 -0.510 -0.727
30-Apr-97 18.79 0.125 3.682 3.807 -0.150 -0.947 -1.097
30-Apr-98 21.50 0.098 9.264 9.362 -0.083 -1.139 -1.222
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $20.66 -$0.011 $0.801 $0.790 $0.000 $0.000 $0.000
Year ended
30-Apr-98 21.45 0.041 9.054 9.095 -0.026 -1.139 -1.165
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
16-Jul-87 to
30-Apr-88 $8.36 -15.95% $ 23,672,346 1.50% 2.61% 1.$6%
Years ended
30-Apr-89 9.84 20.46% 48,915,003 1.50% 2.80% 2.78%
30-Apr-90 10.72 11.45% 119,731,099 1.44% 2.56% 1.43%
30-Apr-91 12.42 18.93% 209,055,868 1.41% 2.59% 2.26%
30-Apr-92 14.06 15.77% 423,231,713 1.28% 2.27% 1.11%
30-Apr-93 14.83 7.52% 714,184,330 1.20% 2.15% 2.99%
30-Apr-94 14.49 0.00% 868,850,190 1.18% 2.07% 40.60%
30-Apr-95 15.56 14.37% 1,032,168,121 1.17% 1.89% 33.34%
30-Apr-96 18.79 25.85% 1,381,352,221 1.12% 1.16% 44.26% 0.0530
30-Apr-97 21.50 20.55% 1,794,422,211 1.06% 0.62% 24.30% 0.0570
30-Apr-98 29.64 44.48% 2,766,709,385 0.98% 0.39% 17.96% 0.0540
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $21.45 3.82% $11,025,073 1.89% -0.39% 24.30% 0.0570
Year ended
30-Apr-98 29.38 43.25% 54,900,438 1.90% -0.58% 17.96% 0.0540
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets(2): 1.91%, 1.77%, 1.49%, 1.41%, 1.28%, 1.20%, 1.18%, 1.17%,
1.12%, 1.06% and 0.98%.
Class B shares - Ratio of net operating expenses to average net assets (2): 1.89% and 1.90%.
Class A shares - Ratio of net investment income (loss) to average net assets(2): 2.21%, 2.54%, 2.51%, 2.59%, 2.27%, 2.15%, 2.07%,
1.89%, 1.16%, 0.62% and 0.39%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): (0.39)% and (0.58)%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
</TABLE>
The AAL Equity Income Fund (formerly known as The AAL Utilities Fund)
INVESTMENT OBJECTIVE
The AAL Equity Income Fund seeks current income, long-term income growth and
capital growth by investing primarily in a diversified portfolio of
income-producing equity securities. By "income-producing equity securities," we
mean equity securities, including securities exchangeable or convertible into
equity securities, that offer dividend yields that exceed the average dividend
yields on stocks comprising the S&P 500(R).
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the Fund's total assets in
income-producing equity securities. We may invest the remainder of the Fund's
total assets, in whole or in part, in additional income-producing equity
securities, bonds and commercial paper.
In selecting equity securities for the Fund, we look for companies that: (1)
have a good growth rate and return on capital; (2) have favorable aspects for
future growth and dividends; (3) are financially sound; (4) have high-quality
management; and (5) are in a favorable competitive environment.
We buy bonds, including convertible securities, if, at the time of purchase at
least two NRSROs have rated them investment grade; or, if unrated, we have
determined them to be of investment grade. We may invest up to 5% of the Fund's
total assets in such securities rated below investment grade. We buy commercial
paper rated in the top two categories by an NRSRO. We may buy unrated commercial
paper, if we determine the commercial paper is investment grade.
Although we do not intend to do so at this time, we may invest up to 15% of the
Fund's net assets in securities located outside the United States. Without
regard to the 15% limitation, we may invest in foreign securities domestically
through depository receipts (i.e., American Depository Receipts ("ADRs")) and
securities of foreign issuers traded on a U.S.
national securities exchange or the NASDAQ National Market System.
We expect to realize income from dividends earned on equity investments and
interest earned on debt securities. We seek capital appreciation by attempting
to select income-producing equity securities that we believe are under-priced
relative to the securities of companies with comparable fundamentals.
ANNUAL ADVISORY FEE
. 0.50 of 1% on the first $250 million
. 0.45 of 1% on average daily net assets over $250 million
PORTFOLIO MANAGER
Lewis Alexander Bohannon, CFA, has managed the day-to-day Fund investments since
November 1, 1995. From 1980 through 1994, Mr. Bohannon was at Cigna Corporation,
serving as managing director and portfolio manager from 1990 to 1994.
INVESTMENT FACTORS AND RISKS INVOLVED
Although we intend to diversify the Fund's investments in securities across many
different industries, income-producing equity securities tend to be more
prevalent in some market sectors than others. The higher dividend yielding
securities included in the S&P 500(R) are found primarily in the services
(communications and retail), energy, utilities, financial services and consumer
non-cyclical and cyclical market sectors. Accordingly, our investments for the
Fund may tend to emphasize certain market sectors more than others.
Financial Risk
The market sectors in which companies tend to issue income-producing equity
securities usually have high operating, interest and other regulatory expenses,
such as the public utilities industry. Also, some of these sectors are maturing,
meaning that growth is peaking. Companies in these market sectors often use
their profits for paying higher dividends rather than reinvesting for company
growth. As a result, income-producing equity securities typically have lower
capital growth potential than equity securities in other sectors. Capital growth
for many income-producing equity securities typically corresponds to the
company's competitive position, in particular its capability to capture market
share from its competitors.
Interest Rate Risk
Like bonds, changes in the level of interest rates affect the value of
income-producing equity securities and the value of the Fund as a whole.
Market Risk
Market cycles affect all equity securities over time, with periods when stock
prices rise generally and periods when stock prices decline generally. However,
income-producing equity securities may rise less and fall less than the market
as a whole because of the higher income component of these securities. You still
could lose money investing in the Fund.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Equity Income Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.51% 0.51%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses 0.35% 0.53%
TOTAL FUND OPERATING
EXPENSES 1.11% 2.04%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $51 $71 $21
After 3 years $75 $95 $65
After 5 years $100 $111 $111
After 10 years $172 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Equity Income Fund for the periods
shown. The information presented is based on a share of beneficial interest
outstanding throughout the applicable period. You should read the table in
conjunction with the Fund's financial statements and related notes, all of which
have been audited by the Fund's independent accountants, Price Waterhouse LLP.
At your request, we will provide you, without charge, a copy of The AAL Mutual
Funds Annual Report, dated April 30, 1998, containing these financial statements
and a more detailed discussion and analysis of the Fund's performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
18-Mar-94 to
30-Apr-94 $10.00 $0.022 -$0.072 -$0.050 $0.000 $0.000 $0.000
Years ended
30-Apr-95 9.95 0.338 -0.498 -0.160 -0.320 0.000 -0.320
30-Apr-96 9.47 0.360 1.420 1.780 -0.350 0.000 -0.350
30-Apr-97 10.90 0.390 0.455 0.845 -0.405 0.000 -0.405
30-Apr-98 11.34 0.275 3.436 3.711 -0.291 -0.450 -0.741
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $11.40 $0.051 -$0.056 -$0.005 -$0.025 $0.000 -$0.025
Year ended
30-Apr-98 11.37 0.194 3.406 3.600 -0.210 -0.450 -0.660
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Period from
18-Mar-94 to
30-Apr-94 $9.95 -0.50% $15,423,861 1.60% 5.12% 0.00% $
Years ended
30-Apr-95 9.47 -1.51% 70,861,404 1.19% 4.08% 24.65%
30-Apr-96 10.90 18.90% 114,460,386 1.20% 3.58% 21.79% 0.0560
30-Apr-97 11.34 7.88% 134,196,399 1.15% 3.57% 5.14% 0.0600
30-Apr-98 14.31 33.50% 197,653,829 1.11% 2.17% 64.00% 0.0600
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $11.37 -0.04% $494,969 1.99% 2.36% 5.14% $0.0600
Year ended
30-Apr-98 14.31 32.42 3,818,315 2.04% 0.96% 64.00% 0.0600
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 2.91%, 1.19%, 1.20%, 1.15% and 1.11%.
Class B shares - Ratio of net operating expenses to average net assets (2): 1.99% and 2.04%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 3.81%, 4.08%, 3.58%, 3.57% and 2.17%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): 2.36% and 0.96%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis
</TABLE>
The AAL Balanced Fund
INVESTMENT OBJECTIVE
The AAL Balanced Fund seeks long-term total return through a balance between
income and the potential for long-term capital growth by investing primarily in
a diversified portfolio of common stocks, bonds and money market instruments. We
will select these investments consistent with the investment policies of The AAL
Capital Growth, Bond and Money Market Funds, respectively.
INVESTMENT POLICIES
Under normal circumstances, we invest 50 to 60% of the Fund's total assets in
common stocks, 30 to 40% in fixed-income securities and 0 to 20% in money market
instruments. We, however, at all times maintain an investment mix within the
following ranges: (1) 35 to 75% in common stocks; (2) 25 to 50% in fixed-income
securities; and (3) 0 to 40% in money market instruments.
We select investments for The AAL Balanced Fund in the following three market
sectors:
1) common stocks, including the securities in which The AAL Capital Growth
Fund may invest;
2) bonds and other debt securities with maturities generally exceeding one
year, including securities in which The AAL Bond Fund may invest; and
3) money market instruments and other debt securities with maturities
generally not exceeding 397 days, including the securities in which The AAL
Money Market Fund may invest.
We periodically review and adjust the mix of investments among three market
sectors to capitalize on potential variations in returns produced by the
interaction of changing financial markets and economic conditions. Changes in
the investment mix may occur several times within a year or over several years
depending on market and economic conditions.
ANNUAL ADVISORY FEE
. 0.60 of 1% on average daily net assets
PORTFOLIO MANAGERS
Frederick L. Plautz, manager of The AAL Capital Growth Fund and Michael R. Hilt,
manager of The AAL Bond and Money Market Funds, serve as co-managers of the
Fund.
INVESTMENT FACTORS AND RISKS INVOLVED
STOCK INVESTMENTS
Financial Risk
Many factors affect an individual company's performance, such as its management
or the demand for a company's products or services. Company performance affects
the value of stock and the value of stocks in the Fund's portfolio.
Market Risk
Over time, the stock market tends to move in cycles, with periods when stock
prices rise generally and periods when stock prices decline generally. The value
of the Fund's investments may increase or decrease more than the stock market in
general, as measured by the S&P 500. Because we invest 35% to 75% of the Fund's
assets in stocks, fluctuating stock prices will have a significant impact on the
Fund's value (the price of the Fund's shares). You could lose money investing in
the Fund.
BOND AND MONEY MARKET INSTRUMENT INVESTMENTS
Interest Rate Risk
Changes in interest rate levels affect the value of the bonds and money market
instruments in the portfolio and the value of the Fund as a whole.
Credit Risk
The creditworthiness of bond issuers will affect the value of their bonds and
money market instruments, which may decline during the Fund's holding periods
and affect the value of the Fund as a whole.
ASSET ALLOCATION
We may shift the portfolio's asset mix of stocks, bonds and money market
instruments based on existing or anticipated market conditions. The returns you
receive will depend on how we have allocated the Fund's investments across these
asset categories. As the allocation fluctuates over time your returns will
fluctuate as well.
The Fund seeks total return, consisting of both capital appreciation, current
income and long-term income growth, by following an asset allocation strategy.
The Fund, however, may not achieve as high a level of either capital
appreciation or income as a Fund that has only one of these as a primary
objective.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Balanced Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net
asset value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects the annual operating expenses the Fund will pay.
Annual operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
period ended April 30, 1998.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.60% 0.60%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses
0.52% 0.51%
TOTAL FUND OPERATING
EXPENSES 1.37% 2.11%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $53 $73 $21
After 3 years $82 $99 $66
After 5 years $112 $113 $113
After 10 years $198 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Balanced Fund for the periods
shown. The information presented is based on a share of beneficial interest
outstanding throughout the applicable period. You should read the table in
conjunction with the Funds' financial statements and related notes, all of which
have been audited by the Fund's independent accountants, Price Waterhouse LLP.
At your request, we will provide you, without charge, a copy of The AAL Mutual
Funds Annual Report, dated April 30, 1998, containing these financial statements
and a more detailed discussion and analysis of the Fund's performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period From
29-Dec-97 to
30-Apr-98 $10.00 $0.041 $0.796 $0.837 -$0.027 $0.000 -$0.027
Class B shares
Period From
29-Dec-97 to
30-Apr-98 $10.00 $0.034 $0.776 $0.810 -$0.020 $0.000 -$0.020
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio Average
End of Return at End of Net Net Turnover Commission
Period for Period Operating Investment Rate Paid per
Period Expenses Income(Loss) Share
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period From
29-Dec-97 to
30-Apr-98 $10.81 8.37% $27,674,985 1.37% 2.19% 11.52% $0.0300
Class B shares
Period From
29-Dec-97 to
30-Apr-98 $10.79 8.10% $2,325,727 2.11% 1.45% 11.52% $0.0300
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 1.63%.
Class B shares - Ratio of net operating expenses to average net assets (2): 2.50%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 1.93%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): 1.06%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis
</TABLE>
The AAL High Yield Bond Fund
INVESTMENT OBJECTIVE
The AAL High Yield Bond Fund seeks high current income and secondarily capital
growth by investing primarily in a diversified portfolio of high risk, high
yield bonds commonly referred to as "junk bonds." The Fund actively seeks to
achieve the secondary objective of capital growth to the extent it is consistent
with the primary objective of high current income.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the Fund's total assets in
high yield bonds. By high yield bonds, we mean debt securities rated below
investment grade by a NRSRO, such as Ba or lower by Moody's or BB or lower by
S&P, or, if unrated, of comparable quality as we determine. Please refer to the
Appendix for information on NRSROs and their credit ratings. We define high
yield bonds to include: fixed, variable, floating rate and deferred interest
debt obligations; zero coupon bonds; pay-in-kind bonds; asset and
mortgage-backed debt obligations; structured debt obligations; and convertible
bonds.
We invest the remaining 35% of the Fund's total assets in any combination of:
(1) additional high yield bonds; (2) investment grade bonds; (3) common and
preferred stocks (including structured preferred stocks); and (4) securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
("U.S. Government Obligations").
We may invest up to 20% of the Fund's net assets in bonds of foreign issuers.
In evaluating the quality of a particular high yield bond for investment in the
Fund, we do not rely exclusively on ratings assigned by the NRSROs. In
appropriate circumstances, we perform our own credit analysis. We consider the
issuer's: (1) financial resources; (2) operating history; (3) sensitivity to
economic conditions and trends; (4) management's abilities; (5) debt maturity
schedules; (6) borrowing requirements; and (7) relative values based on
anticipated cash flow, interest and asset coverage and earnings prospects. We
attempt to identify those issuers of high yield bonds whose financial condition
is adequate to meet future obligations, has improved or is expected to improve
in the future. However, we do not have restrictions on the rating level of the
securities in the Fund's portfolio and may purchase and hold securities in
default.
ANNUAL ADVISORY FEE
. 0.60 of 1% on average daily net assets
PORTFOLIO MANAGER
Dave Carroll, CFA, has managed the day-to-day Fund investments since its
inception on January 8, 1997. Prior to managing the Fund, he served as an
analyst and trader for Cargill Financial Services from January through September
1996. From 1986 to August 1995 he was a second vice president and portfolio
manager for Fortis Advisers, Inc.
INVESTMENT FACTORS AND RISKS INVOLVED
Interest Rate Risk
Changes in interest rate levels affect the value of the bonds in the portfolio
and the value of the Fund as a whole.
Credit Risk
The primary risk of investing in the high yield sector is the credit risk. Bonds
rated below investment grade have greater risks of default than investment grade
bonds and, may in fact, be in default.
Market Risk
Frequently, high yield bonds have a less liquid resale market than the market
for investment grade bonds. In some cases, these bonds have no resale market at
all. As a result, we may have difficulty valuing portfolio securities, choosing
the securities to sell to meet redemption requests and/or selling or disposing
of portfolio securities on favorable terms.
The high yield market has in the past, and may in the future, experience market
risk due to adverse publicity and investor perceptions, whether or not based on
fundamental analysis, decreasing market values and liquidity, especially on the
lesser traded issues. In the past, Congress has attempted restricting the
advantages of high yield bonds and similar attempts could occur in the future.
The monthly weighted average composition of the Fund's portfolio for fiscal year
ended on April 30, 1998, was:
INVESTMENT PERCENTAGE OF
GRADE PORTFOLIO
- -----------------------------------------------
BB 24%
B 73%
CCC 3%
CC 0%
C 0%
D 0%
Non-rated 0%
- ----------------------------------------------
TOTAL 100%
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
- --------------------------------------------------------------
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998, and include the Adviser's reimbursement of
expenses to maintain Total Fund Operating Expenses at 1.00% and 1.75% for Class
A and Class B shares, respectively. Percentages shown for "Other Expenses" are
based on amounts incurred in the prior fiscal year, including reimbursements.
Without reimbursements, "Total Fund Operating Expenses" were 1.18% and 2.05%,
respectively. The Adviser anticipates that reimbursement will remain in effect
through fiscal year end.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.60% 0.60%
12b-1 distribution and
service fees 0.25% 1.00%
Other expenses
(after expense reimbursement) 0.14% 0.14%
TOTAL FUND OPERATING
EXPENSES (AFTER EXPENSE
REIMBURSEMENT) 0.99% 1.74%
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $50 $68 $18
After 3 years $71 $86 $56
After 5 years $94 $96 $96
After 10 years $160 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL High Yield Bond Fund for the
periods shown. The information presented is based on a share of beneficial
interest outstanding throughout the applicable period. You should read the table
in conjunction with the Fund's financial statements and related notes, all of
which have been audited by the Fund's independent accountants, Price Waterhouse
LLP. At your request, we will provide you, without charge, a copy of The AAL
Mutual Funds Annual Report, dated April 30, 1998, containing these financial
statements and a more detailed discussion and analysis of the Fund's
performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period From
8-Jan-97
30-Apr-97 $10.00 $0.270 -$0.120 $0.150 -$0.270 $0.000 -$0.270
Year Ended
30-Apr-98 9.88 0.919 0.528 1.447 -0.919 -0.098 -1.017
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $10.00 $0.251 -$0.120 $0.131 -$0.251 $0.000 -$0.251
Year ended
30-Apr-98 9.88 0.843 0.528 1.371 -0.843 -0.098 -0.941
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio
End of Return at End of Net Net Turnover
Period for Period Operating Investment Rate
Period Expenses Income(Loss)
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
8-Jan-97
30-Apr-97 $9.88 1.51% $44,680,637 1.00% 9.11% 36.90%
Year ended
30-Apr-98 10.31 15.12% 100,828,858 0.99% 8.94% 112.37%
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $ 9.88 1.31% $2,660,309 1.75% 8.66% 36.90%
Year ended
30-Apr-98 10.31 14.27% 9,714,463 1.74% 8.22% 112.37%
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 1.28% and 1.18%.
Class B shares - Ratio of net operating expenses to average net assets (2): 2.00% and 2.05%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 8.83% and 8.75%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): 8.41% and 7.90%
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis
</TABLE>
The AAL Municipal Bond Fund
INVESTMENT OBJECTIVE
The AAL Municipal Bond Fund seeks a high level of current income exempt from
federal income taxes, consistent with capital preservation by investing
primarily in a diversified portfolio of municipal securities.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 80% of the Fund's net assets in
municipal bonds where the income is exempt from federal income tax. Of the 80%
invested in municipal bonds, we invest at least 75% of them in bonds rated
within the three highest rating categories assigned by at least one NRSRO at the
time of purchase.
State and local governments and municipalities issue municipal bonds to raise
money for a variety of public purposes, including general financing for state
and local governments or financing for specific projects or public facilities. A
municipality may issue municipal bonds in anticipation of future revenues from a
specific municipal project (revenue bonds), or backed by the full taxing power
of a municipality (general obligation bonds), or from the revenues of a specific
project on the credit of a private organization (industrial development bonds).
Federal law generally exempts the interest paid on municipal bonds from federal
income taxes.
We may invest 25% or more of the Fund's total assets in industrial development
bonds. The Fund tries not to invest more than 25% of its total assets in
municipal bonds that are so closely related that an economic, business or
political development affecting one bond could also affect the others.
We may purchase certain tax-exempt bonds that involve a private purpose. The
interest paid on these private activity bonds are subject to the alternative
minimum tax ("AMT paper"). We limit our purchases of AMT paper to 25% of the
Fund's total assets.
ANNUAL ADVISORY FEE
. 0.50 of 1% on the first $250 million
. 0.45 of 1% on average daily net assets over $250 million.
PORTFOLIO MANAGER
Duane A. McAllister, CFA, has managed the day-to-day Fund investments since
April 1994. Prior to joining AAL Capital Management Corporation on November 1,
1995, he managed the Fund while serving as vice president of Duff & Phelps
Investment Management Co. For the five-year period before managing the Fund, Mr.
McAllister managed portfolios for the Northern Trust Company and First National
Bank and Trust in Rockford, Illinois.
INVESTMENT FACTORS AND RISKS INVOLVED
Interest Rate Risk
Changes in interest rate levels affect the value of the bonds in the portfolio
and the value of the Fund as a whole.
Credit Risk
The creditworthiness of bond issuers will affect the value of their bond, which
may decline during the Fund's holding periods and affect the value of the Fund
as a whole.
Tax Rates
Changes in federal income tax rates may affect both the net asset value and the
Fund's taxable equivalent interest.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Municipal Bond Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy, sell or hold
shares of the Fund. For Class A shares, we based expenses on the maximum 4%
sales charge, which is reduced on purchases of $25,000 or more. For Class B
shares, we based expenses on the maximum 5% contingent deferred sales charge,
which is reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage of
offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects and annual operating expenses paid by the Fund.
Annual operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998. On September 1, 1997, we reduced the advisory
fee for this Fund.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE OF CLASS CLASS
AVERAGE NET ASSETS) A B
Management fee 0.48% 0.48%
12b-1 distribution and service fees 0.25% 1.00%
Other expenses 0.12% 0.26%
TOTAL FUND OPERATING EXPENSES 0.85% 1.74%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $48 $68 $18
After 3 years $67 $86 $56
After 5 years $86 $96 $96
After 10 years $143 N/A* N/A*
*Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Municipal Bond Fund for the
periods shown. The information presented is based on a share of beneficial
interest outstanding throughout the applicable period. You should read the table
in conjunction with the Fund's financial statements and related notes, all of
which have been audited by the Funds' independent accountants, Price Waterhouse
LLP. At your request, we will provide you, without charge, a copy of The AAL
Mutual Funds Annual Report, dated April 30, 1998, containing these financial
statements and a more detailed discussion and analysis of the Fund's
performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
16-Jul-87 to
30-Apr-88 $10.00 $0.398 -$0.280 $0.118 -$0.398 $0.000 -$0.398
Years ended
30-Apr-89 9.72 0.599 0.020 0.619 -0.599 0.000 -0.599
30-Apr-90 9.74 0.608 -0.035 0.573 -0.608 -0.005 -0.613
30-Apr-91 9.70 0.616 0.434 1.050 -0.616 -0.004 -0.620
30-Apr-92 10.13 0.598 0.234 0.832 -0.598 -0.004 -0.602
30-Apr-93 10.36 0.571 0.631 1.202 -0.571 -0.001 -0.572
30-Apr-94 10.99 0.539 -0.410 0.129 -0.539 -0.020 -0.559
30-Apr-95 10.56 0.523 0.186 0.709 -0.523 -0.056 -0.579
30-Apr-96 10.69 0.521 0.300 0.821 -0.521 -0.080 -0.601
30-Apr-97 10.91 0.521 0.194 0.715 -0.521 -0.184 -0.705
30-Apr-98 10.92 0.519 0.613 1.132 -0.519 -0.133 -0.652
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $11.02 $0.137 -$0.100 -$0.037 -$0.137 $0.000 -$0.137
Year ended
30-Apr-98 10.92 0.423 0.613 1.036 -0.423 -0.133 -0.556
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio
End of Return at End of Net Net Turnover
Period for Period Operating Investment Rate
Period Expenses Income(Loss)
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Period from
16-Jul-87 to
30-Apr-88 $9.72 1.29% $10,031,478 1.50% 5.72% 20.83%
Years ended
30-Apr-89 9.74 6.53% 41,217,475 0.94% 6.30% 29.24%
30-Apr-90 9.70 5.93% 78,844,594 0.90% 6.13% 30.83%
30-Apr-91 10.13 11.12% 114,953,939 0.90% 6.21% 13.63%
30-Apr-92 10.36 8.39% 172,494,589 0.95% 5.81% 0.74%
30-Apr-93 10.99 11.84% 271,319,546 1.00% 5.32% 3.41%
30-Apr-94 10.56 1.04% 370,568,847 0.99% 4.87% 10.15%
30-Apr-95 10.69 7.01% 377,764,861 0.98% 5.01% 172.49%
30-Apr-96 10.91 7.74% 412,777,320 0.95% 4.69% 130.52%
30-Apr-97 10.92 6.64% 421,668,316 0.89% 4.69% 119.79%
30-Apr-98 11.40 10.50% 467,145,934 0.85% 4.55% 139.18%
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $10.92 0.34% $ 764,783 1.69% 4.09% 119.79%
Year ended
30-Apr-98 11.40 9.58% 3,609,800 1.74% 3.67% 139.18%
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 2.28%, 1.46%, 1.14%, 1.10%, 1.04%, 1.00%, 0.99%, 0.98%,
0.95%, 0.89% and 0.85%.
Class B shares - Ratio of net operating expenses to average net assets (2) 1.69% and 1.74%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 4.95%, 5.79%, 5.89%, 6.01%, 5.72%, 5.32%, 4.87%,
5.01%, 4.69%, 4.69% and 4.55%.
Class B shares - Ratio of net investment expenses to average net assets (2): 4.09% and 3.67%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
</TABLE>
The AAL Bond Fund
INVESTMENT OBJECTIVE
The AAL Bond Fund seeks a high level of current income, consistent with capital
preservation by investing primarily in a diversified portfolio of investment
grade bonds.
INVESTMENT POLICIES
Under normal circumstances, we invest at least 65% of the Fund's total assets
in:
(1) bonds of U.S. and foreign issuers payable in U.S. dollars rated within the
four highest rating categories by at least two NRSROs at the time of purchase;
and
(2) bonds or other securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, primarily those securities supported by the full
faith and credit of the U.S. Treasury.
We may invest the remaining 35% of the Fund's total assets in: (1) privately
issued or guaranteed mortgage-related securities rated within the four highest
categories by at least two NRSROs or unrated mortgage-related securities, if we
determine at the time of purchase these securities have credit equal to these
ratings; (2) commercial paper in the highest rating category by a NRSRO, or
commercial paper issued or guaranteed by a corporation who has outstanding debt
rated in the two highest categories by a NRSRO at the time of purchase; (3) bank
obligations, including repurchase agreements, of banks having total assets in
excess of $1 billion; and (4) corporate obligations, including variable rate
master notes, rated in the two highest categories by a NRSRO, or issued by a
corporation whose outstanding debt has an equal or better rating at the time of
purchase.
Although we have no restrictions on the maturity of the debt securities in the
portfolio, generally we maintain a weighted average effective maturity of
between 5 and 10 years. We use the effective maturity of a debt security in
calculating weighted average effective maturity, which takes into account
projected prepayments, call dates, put dates and sinking funds, if any, that
reduce the stated maturity date on the bond.
We anticipate that during normal market conditions the average portfolio
maturity of the Fund will not exceed 20 years. We use the stated final maturity
date of a security in calculating average maturity, notwithstanding earlier call
dates and possible prepayments.
ANNUAL ADVISORY FEE
. 0.50 of 1% on the first $250 million
. 0.45 of 1% on average daily net assets over $250 million
PORTFOLIO MANAGER
Michael R. Hilt, CFA, has managed the day-to-day Fund investments since November
1, 1995. From April 1994 through August 1995, Mr. Hilt served as portfolio
manager and quantitative analyst for Conseco Capital Management, Inc. From
August 1992 through April 1994, he served as a portfolio manager and
quantitative analyst for PPM America, Inc. Mr. Hilt also manages The AAL Money
Market Fund.
INVESTMENT FACTORS AND RISKS INVOLVED
Interest Rate Risk
Changes in interest rate levels affect the value of the bonds in the portfolio
and the value of the Fund as a whole.
Credit Risk
The creditworthiness of bond issuers will affect the value of their bonds, which
may decline during the Fund's holding periods and affect the value of the Fund
as a whole.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in The AAL Bond Fund.
Shareholder Transaction Expenses
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, we based expenses on the maximum 4% sales
charge, which is reduced on purchases of $25,000 or more. For Class B shares, we
based expenses on the maximum 5% contingent deferred sales charge, which is
reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4% None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
Annual Fund Operating Expenses
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed ax a percentage of average net assets for the
fiscal year ended April 30, 1998. On September 1, 1997, we reduced the advisory
fee for this Fund.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee 0.48% 0.48%
12b-1 distribution
and service fees 0.25% 1.00%
Other expenses 0.22% 0.44%
TOTAL FUND OPERATING
EXPENSES 0.95% 1.92%
Expense Example
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $49 $70 $20
After 3 years $70 $91 $61
After 5 years $91 $105 $105
After 10 years $154 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use the expense example for comparison purposes only. It does not
represent the Funds actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Bond Fund for the periods shown.
The information presented is based on a share of beneficial interest outstanding
throughout the applicable period. You should read the table in conjunction with
the Fund's financial statements and related notes, all of which have been
audited by the Funds' independent accountants, Price Waterhouse LLP. At your
request, we will provide you, without charge, a copy of The AAL Mutual Funds
Annual Report, dated April 30, 1998, containing these financial statements and a
more detailed discussion and analysis of the Fund's performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
16-Jul-87 to
30-Apr-88 $10.00 $0.602 -$0.360 $0.242 -$0.602 $0.000 -$0.602
Years ended
30-Apr-89 9.64 0.826 -0.255 0.571 -0.826 -0.055 -0.881
30-Apr-90 9.33 0.806 -0.080 0.726 -0.806 0.000 -0.806
30-Apr-91 9.25 0.772 0.510 1.282 -0.772 0.000 -0.772
30-Apr-92 9.76 0.721 0.273 0.994 -0.721 -0.013 -0.734
30-Apr-93 10.02 0.661 0.627 1.288 -0.661 -0.037 -0.698
30-Apr-94 10.61 0.584 -0.660 -0.076 -0.584 -0.260 -0.844
30-Apr-95 9.69 0.580 -0.078 0.502 -0.580 -0.002 -0.582
30-Apr-96 9.61 0.584 0.010 0.594 -0.584 0.000 -0.584
30-Apr-97 9.62 0.595 0.010 0.605 -0.595 0.000 -0.595
30-Apr-98 9.63 0.570 0.360 0.930 -0.570 0.000 -0.570
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $ 9.71 $0.175 -$0.070 $0.105 -$0.175 $0.000 -$0.175
Year ended
30-Apr-98 9.64 0.480 0.350 0.830 -0.480 0.000 -0.480
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio
End of Return at End of Net Net Turnover
Period for Period Operating Investment Rate
Period Expenses Income(Loss)
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
16-Jul-87 to
30-Apr-88 $9.64 2.56% $ 20,938,863 0.75% 8.67% 85.88%
Years ended
30-Apr-89 9.33 6.21% 54,006,123 0.83% 8.86% 54.49%
30-Apr-90 9.25 7.84% 94,937,997 0.98% 8.38% 38.00%
30-Apr-91 9.76 14.34% 139,228,954 1.00% 8.06% 6.39%
30-Apr-92 10.02 10.47% 229,309,955 1.03% 7.19% 12.18%
30-Apr-93 10.61 13.22% 370,219,492 1.03% 6.35% 26.12%
30-Apr-94 9.69 -0.99% 442,962,543 1.02% 5.61% 27.75%
30-Apr-95 9.61 5.47% 429,355,163 1.03% 6.12% 44.57%
30-Apr-96 9.62 6.18% 430,846,686 1.01% 5.89% 125.77%
30-Apr-97 9.63 6.43% 389,342,652 0.98% 6.10% 212.49%
30-Apr-98 9.99 9.86% 353,405,552 0.95% 5.77% 483.76%
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $9.64 0.96% $ 390,959 1.86% 5.51% 212.49%
Year ended
30-Apr-98 9.99 8.75% 1,431,449 1.92% 4.74% 483.76%
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 1.83%, 1.37%, 1.22%, 1.17%, 1.08%, 1.03%, 1.02%, 1.03%,
1.01%, .98% and .95%.
Class B shares - Ratio of net operating expenses to average net assets (2): 1.86% and 1.92%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 7.59%, 8.32%, 8.13%, 7.89%, 7.14%, 6.35%, 5.61%,
6.12%, 5.89%, 6.10% and 5.77%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): 5.51% and 4.74%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis
</TABLE>
The AAL Money Market Fund
INVESTMENT OBJECTIVE
The AAL Money Market Fund seeks a high level of current income, consistent with
liquidity and the preservation of capital, by investing in a diversified
portfolio of high-quality, short-term money market instruments.
INVESTMENT POLICIES
We invest in short-term money market instruments for the Fund, such as:
1) obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
2) certificates of deposit, bankers acceptances and similar obligations of U.S.
banks, savings associations, foreign branches of U.S. banks and domestic
branches of foreign banks, which have total assets of more than $1 billion at
the time of purchase, and who are members of the Federal Deposit Insurance
Corporation (FDIC);
3) commercial paper that at the time of purchase is defined as First Tier or
"Second Tier" by the Investment Company Act of 1940, as long as we do not invest
more than 5% of the Fund's total assets in Second Tier commercial paper; and
4) corporate obligations, including variable rate master notes that at the time
of purchase are in one of the two highest categories of a NRSRO, or, if unrated,
issued by a corporation with outstanding debt that has an equivalent or better
rating at the time of purchase.
We make investments for the Fund consistent with Rule 2a-7 under the Investment
Company Act of 1940. As such, we invest in securities maturing in 397 days or
less and maintain a dollar-weighted average portfolio maturity of not more than
90 days. By limiting the maturity of the Fund's investments, we seek to lessen
the changes in asset values caused by fluctuations in short-term interest rates.
To the extent it is practical, we try to maintain a constant net asset value per
share of $1.00 for the Fund.
We may purchase participation interests (interests in securities held by others)
in securities we are authorized to invest for the Fund as described above.
THE U.S. GOVERNMENT NEITHER INSURES NOR GUARANTEES THE INVESTMENTS IN THIS FUND.
ANNUAL ADVISORY FEE
. 0.50 of 1% on the first $500 million
. 0.45 of 1% on average daily net assets over $500 million
PORTFOLIO MANAGER
Michael R. Hilt, CFA, has managed the day-to-day Fund investments since November
1, 1995. From April 1994 through August 1995, Mr. Hilt served as portfolio
manager and quantitative analyst for Conseco Capital Management, Inc. From
August 1992 through April 1994, he served as a portfolio manager and
quantitative analyst for PPM America, Inc.
INVESTMENT FACTORS AND RISKS INVOLVED
Interest Rate Risk
Changes in interest rate levels affect the yield.
Credit Risk
The Fund carries the risk that the creditworthiness of some securities issuers
may decline during the Fund's holding period.
EXPENSE SUMMARIES AND EXAMPLE
The following expense summaries and example should assist you in understanding
the various recurring and non-recurring costs and expenses you may directly or
indirectly incur with your investment in the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Shareholder transaction expenses are charges you pay when you buy or sell shares
of the Fund. For Class A shares, you do not pay any sales charges or redemption
fees. For Class B shares, we based expenses on the maximum 5% contingent
deferred sales charge, which is reduced by 1% for each year owned.
SHAREHOLDER CLASS CLASS
TRANSACTION EXPENSES A B
Maximum sales charge imposed
on purchases (as a percentage
of offering price) None None
Maximum sales charge imposed
on reinvested dividends (as a
percentage of net asset value) None None
Maximum deferred sales charge
(as a percentage of net asset
value) None 5%
Redemption fee (The Funds
currently charge $12.00 for
each wire redemption.) None None
Exchange fee None None
ANNUAL FUND OPERATING EXPENSES
The following table reflects annual operating expenses paid by the Fund. Annual
operating expenses include a management fee paid to the Adviser, 12b-1
distribution and service fees and other expenses for maintaining shareholder
records and furnishing shareholder services, statements and financial reports.
Operating expenses are expressed as a percentage of average net assets for the
fiscal year ended April 30, 1998, and include the Adviser's waiver of 0.225 of
1% of the 0.50 of 1% maximum advisory fee we could charge for the Fund and a
waiver of 0.100 of 1% of the 0.125 of 1% maximum 12b-1 service fees we could
charge for Class A and Class B shares, respectively. For the fiscal year ended
April 30, 1998, without the expense waivers, "Total Fund Operating Expenses"
were 1.04% and 2.01% for Class A and Class B shares, respectively. We anticipate
the waiver continuing through the fiscal year end.
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE CLASS CLASS
OF AVERAGE NET ASSETS) A B
Management fee
(after fee waiver) 0.28% 0.28%
12b-1 distribution and
service fees (after fee waiver) 0.02% 0.77%
Other expenses 0.38% 0.60%
TOTAL FUND OPERATING
EXPENSES (AFTER FEE WAIVER) 0.68% 1.65%
EXPENSE EXAMPLE
The following expense example shows the cumulative expenses attributable to a
hypothetical $1,000 investment with an annual return of 5% compounded annually,
in each class, for the years shown.
EXPENSE CLASS CLASS CLASS B NO
EXAMPLE A B REDEMPTION
After 1 year $7 $67 $17
After 3 years $22 $83 $53
After 5 years $39 $91 $91
After 10 years $86 N/A* N/A*
* Class B shares convert into Class A shares after five years.
You should use this expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The financial highlights table covers The AAL Money Market Fund for the periods
shown. The information presented is based on a share of beneficial interest
outstanding throughout the applicable period. You should read the table in
conjunction with the Funds financial statements and related notes, all of which
have been audited by the Funds independent accountants, Price Waterhouse LLP. At
your request, we will provide you, without charge, a copy of The AAL Mutual
Funds Annual Report, dated April 30, 1998, containing these financial statements
and a more detailed discussion and analysis of the Funds performance.
<TABLE>
INCOME FROM INVESTMENT LESS DISTRIBUTIONS
OPERATIONS
Share Class NAV: Net Net Total from Dividends Distribution Total
and Periods Start Investment Realized Investment from Net from Net Dividends
of Income and Un- Operations Investment Realized and
Period (Loss) realized Income Gain on Distributions
Gain(Loss) on Investments
<CAPTION>
Class A shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period from
16-Jul-87 to
30-Apr-88 $1.00 $0.009 $0.000 $0.009 -$0.009 $0.000 -$0.009
Years ended
30-Apr-89 1.00 0.078 0.000 0.078 -0.078 0.000 -0.078
30-Apr-90 1.00 0.079 0.000 0.079 -0.079 0.000 -0.079
30-Apr-91 1.00 0.068 0.000 0.068 -0.068 0.000 -0.068
30-Apr-92 1.00 0.045 0.000 0.045 -0.045 0.000 -0.045
30-Apr-93 1.00 0.025 0.000 0.025 -0.025 0.000 -0.025
30-Apr-94 1.00 0.019 0.000 0.019 -0.019 0.000 -0.019
30-Apr-95 1.00 0.038 0.000 0.038 -0.038 0.000 -0.038
30-Apr-96 1.00 0.048 0.000 0.048 -0.048 0.000 -0.048
30-Apr-97 1.00 0.051 0.000 0.051 -0.051 0.000 -0.051
30-Apr-98 1.00 0.050 0.000 0.050 -0.050 0.000 -0.050
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $1.00 $0.013 $0.000 $0.013 -$0.013 $0.000 -$0.013
Year ended
30-Apr-98 1.00 0.038 0.000 0.038 -0.038 0.000 -0.038
SUPPLEMENTAL DATA
AND RATIOS
NAV: Total Net Assets Ratio of Ratio of Portfolio
End of Return at End of Net Net Turnover
Period for Period Operating Investment Rate
Period Expenses Income(Loss)
(1) to Average to Average
Net Assets* Net Assets*
(2) (2)
Class A shares
Period from
16-Jul-87 to
30-Apr-88 $1.00 0.91% $ 7,990,507 0.07% 7.06% NA
Years ended
30-Apr-89 1.00 8.10% 143,217,501 0.76% 8.29%
30-Apr-90 1.00 8.24% 223,447,573 1.04% 7.84%
30-Apr-91 1.00 7.07% 228,465,749 1.07% 6.85%
30-Apr-92 1.00 4.54% 147,584,931 1.11% 4.56%
30-Apr-93 1.00 2.53% 83,274,493 1.13% 2.53%
30-Apr-94 1.00 1.95% 65,008,303 1.26% 2.00%
30-Apr-95 1.00 3.92% 70,210,675 1.17% 3.95%
30-Apr-96 1.00 4.94% 116,014,091 0.83% 4.89%
30-Apr-97 1.00 5.21% 189,616,902 0.55% 4.91%
30-Apr-98 1.00 5.12% 240,737,453 0.68% 4.98%
Class B shares
Period from
08-Jan-97 to
30-Apr-97 $1.00 1.32% $ 569,097 1.78% 3.81% NA
Year ended
30-Apr-98 1.00 4.26% 1,200,622 1.65% 4.02%
* If the Fund had paid all of its expenses for Class A and Class B shares,
the ratios would be as follows:
Class A shares - Ratio of net operating expenses to average net assets (2): 1.76%, 1.18%, 1.04%, 1.07%, 1.11%, 1.27%, 1.51%, 1.42%,
1.28%, 1.10% and 1.04%.
Class B shares - Ratio of net operating expenses to average net assets (2): 3.54% and 2.01%.
Class A shares - Ratio of net investment income (loss) to average net assets (2): 5.37%, 7.87%, 7.84%, 6.85%, 4.56%, 2.38%, 1.75%,
3.70%, 4.46%, 4.36% and 4.62%.
Class B shares - Ratio of net investment income (loss) to average net assets (2): 2.05% and 3.67%.
(1) Total return assumes reinvestment of all dividends and distributions but
does not reflect any deductions for sales charges. The aggregate (not
annualized) total return is shown for periods less than one year.
(2) For periods less than one year, both the ratio of net operating expenses to
average net assets and the ratio of net investment income (loss) to average
net assets are calculated on an annualized basis.
</TABLE>
Additional Investment Factors And Risks Regarding The Funds
TEMPORARY DEFENSIVE PURPOSES
We have a temporary defensive position policy that allows us to invest up to
100% of a Fund's total assets in cash and short-term money market obligations,
including tax-exempt money market funds and investment grade fixed-income
securities when significant adverse market, economic, political or other
circumstances require immediate action to avoid losses. Primarily, we may
purchase the following types of securities for temporary defensive purposes:
. securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities;
. commercial paper rated at the time of purchase in the highest rating
category by NRSROs; and
. bank obligations, including repurchase agreements, of banks having total
assets in excess of $1 billion.
We may invest up to 100% of The AAL International Fund's total assets in U.S.
securities or in securities primarily traded in one or more foreign countries,
or in debt securities to a greater extent than 20%.
INTEREST RATE RISK
For The AAL Balanced, High Yield Bond, Municipal Bond, Bond and Money Market
Funds and, to some extent, The AAL Equity Income Fund, you can expect that
interest rate changes will significantly impact upon the value of your Fund
investments. Interest rates are influenced by supply and demand as well as
economic monetary policies. In general, a decline in prevailing interest rate
levels generally will increase the value of the securities, particularly the
bonds, held in a Fund's portfolio and vice versa. As a result, interest rate
fluctuations will affect a Fund's net asset values but not the income received
from its existing portfolio. However, changes in the prevailing interest rate
level will affect the yield on subsequently purchased securities. Because yields
on the securities available for purchase by the Funds will vary over time, we
cannot assure a specific yield on a Fund's shares.
Longer-term bonds are more sensitive to interest rate changes than shorter-term
bonds, reflecting the greater risk of holding these bonds for a longer period of
time. Longer-term bond prices increase more dramatically when interest rates
fall and decrease more dramatically when interest rates rise. Prices of
short-term debt, such as money market instruments, are less price sensitive to
interest rate changes because of their short duration. Securities that pay high
dividends, like bonds, are more sensitive to interest rate levels than other
equity securities that pay low dividends.
INVESTING IN BONDS VERSUS INVESTING IN A MUTUAL FUND
Investing in a mutual fund that owns bonds is not the same as buying an
individual bond. Both bonds and funds owning bonds offer regular income. While
individual bonds can offer a fixed amount of regular income until maturity, a
mutual fund portfolio may include a constantly changing pool of bonds with
differing interest rates and maturity prices. Both share prices and dividends
may fluctuate in a mutual fund owning bonds.
INVESTMENT GRADE AND MEDIUM GRADE BOND INVESTMENTS
We may purchase investment grade bonds for The AAL International, Equity Income,
Balanced, High Yield Bond, Municipal Bond and Bond Funds. A debt or other
fixed-income security is considered investment grade if it is rated investment
grade by a NRSRO, such as BBB or better by Duff and Phelps Credit Rating Co.
("D&P") and S&P or Baa or better by Moody's. Securities rated in the fourth
highest category, such as BBB by D&P or S&P or Baa by Moody's, are considered
medium grade bonds and have more sensitivity to economic changes and speculative
characteristics. If a bond in a Fund has lost its rating or has its rating
reduced, the Fund does not have to sell the security, but the Adviser will
consider the lost or reduced rating in determining whether that Fund should
continue to hold the bond.
HIGH YIELD BOND INVESTMENTS
We may invest in high yield bonds for The AAL International (up to 20% of total
assets), Equity Income (up to 5% of total assets) and High Yield Bond Funds.
Credit Risk: The primary risk of investing in the high yield sector is the
credit risk. Bonds rated below investment grade have greater risks of default
than investment grade bonds (including medium grade bonds) and, may in fact, be
in default. Issuers of high yield bonds usually do not have strong historical
financial conditions, requiring them to offer higher yields to compensate for
the greater risk of default on the payment of interest and principal. These
bonds have speculative characteristics or are speculative. As a result, their
market values are less sensitive to interest rate changes on a short-term basis,
but more sensitive to adverse economic developments or individual corporate
developments because of their lower credit quality. During an economic downturn
or period of rising interest rates, issuers of lower-rated bonds may have more
difficulty meeting their principal and interest payment obligations or obtaining
additional financing to make the interest payments on their debt. When issuers
have difficulty meeting projected goals or obtaining additional financing, the
default rate on high yield bonds will likely rise.
Market Risk: Frequently, high yield bonds are less liquid than investment grade
bonds. In some cases, these bonds have no resale market at all. As a result,
these bonds are more difficult to price accurately and are subject to price
volatility. We may experience difficulty in valuing the high yield securities in
these portfolios or purchasing or disposing of them on favorable terms,
particularly during adverse market or economic conditions. In the event of an
illiquid market or in the absence of readily available market quotations for
certain high yield bonds in the Funds' portfolios, our judgment will play a
greater role in valuing the securities.
CONVERTIBLE BONDS
Except for The AAL Money Market Funds, we may invest in convertible bonds,
subject to any restrictions on the quality of bonds in which a Fund may invest.
We also may retain any stocks received upon conversion that do not fall within
the Fund's investment parameters to: (1) permit orderly disposition; (2)
establish a long-term holding basis for Federal income tax purposes; or (3) seek
capital growth.
Convertible bonds are often rated below investment grade or not rated because
they fall below debt obligations and just above equities in order of preference
or priority on the issuer's balance sheet. Hence, any issuer with investment
grade senior debt may issue convertible securities with ratings less than
investment grade debt.
MORTGAGE-BACKED SECURITIES
For The AAL Balanced, High Yield Bond and Bond Funds, we may invest in
mortgage-backed securities with amortizing payments consisting of both interest
and principal and prepayment privileges (the ability to prepay the principal or
a portion thereof without penalty). Mortgaged-backed securities represent
interest in pools of mortgage loans made by lenders such as savings and loan
institutions, mortgage bankers, commercial banks and others. Various government,
government-related and private organizations combine these mortgages for sale to
investors (i.e., the Government National Mortgage Association ("GNMA")
guarantees and issues mortgage-backed securities). Mortgage-backed securities
generally provide for a "pass through" of monthly payments made by individual
borrowers on their residential mortgage loans, net of any fees paid to the
issuer or guarantor of the securities. The yield on these securities applies
only to the unpaid principal balance. We reinvest the periodic payments of
principal and interest and prepayments, if any, in securities at the prevailing
market interest rates. The prevailing rates may be higher or lower than the rate
on the original investment. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities tend to
accelerate. Accordingly, any prepayments on mortgage-backed securities that we
hold for a Fund reduce our ability to maintain positions in high-yielding,
mortgage- backed securities and reinvest the principal at comparable yields for
the Fund. If we buy any mortgage-backed securities for a Fund at a premium, the
Fund receives prepayments, if any, at par or stated value, which lowers the
return on the Fund.
PORTFOLIO TURNOVER
We expect The AAL Small Cap Stock, Mid Cap Stock, High Yield Bond, Municipal
Bond and Bond Funds to have portfolio turnover greater than 100%, and the other
Funds to have a portfolio turnover of less than 100%. We do not calculate a
portfolio turnover rate for The AAL Money Market Fund because of the short
maturities of its investments. Due to the high volume of buying and selling
activity in a portfolio with turnover in excess of 100%, we may pay more
commissions for a Fund. We also may realize more taxable gains than in
portfolios with less turnover, which may result in an increase in a Fund's
expenses and lower returns for shareholders. We may trade for a Fund at a
portfolio rate significantly exceeding 100% (i.e., 400% or more for The AAL Bond
Fund), when we believe the benefits of short-term investments outweigh any
increase in transactions costs or capital gains. For more information on
transaction expenses and taxes, please refer to sections entitled "Portfolio
Transactions," "Dividends, Distributions, and Taxes," and "Yield and Performance
Information."
REPURCHASE AGREEMENTS AND BORROWING
To earn income on available cash or for temporary defensive purposes, we may
invest in repurchase agreements for the Funds. We must hold an amount of cash or
government securities at least equal to the market value of the securities held
pursuant to the agreement. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, we may experience delays and expenses in
liquidating the securities, declines in the securities' value and loss of
interest for a Fund. We may borrow money, but only from banks and only for
temporary or emergency purposes. We may not borrow more than 10% of a Fund's net
assets and we must repay any amount we borrow for a Fund before we can buy
additional securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
To ensure the availability of suitable securities, we may buy when-issued or
delayed delivery securities for The AAL International, Equity Income, Balanced,
High Yield Bond, Municipal Bond, Bond and Money Market Funds. Generally, we will
not pay for when-issued securities or start earning interest until we have
received the underlying securities for the Funds. We do not speculate in
when-issued securities for the Funds. We purchase the securities with the
expectation of acquiring the underlying securities when delivered. However, we
sell when-issued securities before the settlement date when we believe it is in
the best interest of a Fund.
LENDING PORTFOLIO SECURITIES
To generate additional income, we may from time to time lend securities from a
Fund's portfolios to brokers, dealers and financial institutions such as banks
and trust companies. You will find a full explanation of portfolio securities
lending and the restrictions thereon in the Statement of Additional Information.
Presently, we do not intend to lend portfolio securities for the Funds.
ILLIQUID AND RESTRICTED SECURITIES
Except for The AAL Money Market Fund, we may hold up to 15% of a Fund's net
assets in illiquid securities. We may hold up to 10% of The AAL Money Market
Fund's net assets in restricted and other illiquid securities. Illiquid
securities are securities we believe cannot be sold within seven days in the
normal course of business at approximately the amount at which we have valued or
priced the securities for a Fund, including securities we acquired in private
placements that have restrictions on their resale ("restricted securities"). We
deem time deposits and repurchase agreements maturing in more than seven days
illiquid. Because an active market may not exist for illiquid securities, we may
experience delays and additional cost when trying to sell illiquid securities.
For more information on restricted and other illiquid securities regarding The
AAL Money Market Fund, please refer to the Statement of Additional Information,
"Privately Issued Securities: The AAL Money Market Fund." The Board of Trustees
has established procedures for determining the liquidity of Fund securities and
has delegated the day-to-day liquidity determinations to the Adviser.
Subject to the limitations for illiquid investments stated above, we may
purchase liquid restricted securities eligible for resale under Rule 144A under
the Securities Act of 1933 (the "Act"), without regard to the 15% or 10%
limitation. Rule 144A permits certain qualified institutional buyers, such as
the Funds, to trade in privately placed securities not registered under the Act.
Institutional markets for restricted securities have developed as a result of
Rule 144A, providing both readily ascertainable market values for 144A
securities and the ability to liquidate these investments to satisfy redemption
orders. However, an insufficient number of qualified institutional buyers
interested in purchasing certain Rule 144A securities held by a Fund could
adversely affect their marketability, causing us to sell the securities at
unfavorable prices.
VARIABLE RATE DEMAND NOTES
All of the Funds may purchase variable rate securities. The AAL Money Market
Fund may purchase variable rate securities (the yields will vary in relation to
changes in specific money market rates, such as the prime rate) with actual
maturities of 397 days or more, but only under conditions established by the
Securities and Exchange Commission rules that permit such securities to be
considered as having maturities of less than 397 days. We intend to invest in
these longer-term variable rate securities only when, in our view, we may be
able to take advantage of the higher yield that is usually paid on these
securities over other short-term securities, and it appears to us that the
variable rates on these securities may reduce the fluctuations in market value
typical of longer-term securities. We also may purchase variable rate securities
with a put option, which may further reduce the risk of fluctuations in market
value.
STRUCTURED SECURITIES
The AAL International Fund may invest in structured notes and/or preferred
stocks. These securities have a value (i.e., principal amount at maturity and/or
coupons or dividend amounts) linked to currencies, interest rates, commodities,
indices or other financial indicators. Typically, these securities are debt
securities or deposits whose value at maturity (i.e., principal value) or coupon
rate is determined by reference to a specific instrument or statistic. For
example, gold structured securities may provide for maturity values that depend
on the price of gold, resulting in securities whose prices tend to rise and fall
together with gold prices. These securities involve additional risk, including
structures that may reduce the coupons and/or dividend amounts to zero or the
redemption amounts payable at maturity as a result of a decline in the value of
the underlying instrument. Structured securities may have more volatility than
the price of the underlying instrument.
FUTURES CONTRACTS AND OPTIONS
Except for The AAL Money Market Fund, we may engage in options, futures and
options on futures transactions for the Funds, but only for bona fide hedging or
other permissible risk management purposes. Generally, we do not make these
investments if the initial margin deposits and premiums paid for un-expired
options exceed 5% of a Fund's total assets.
In addition, we do not:
. commit more than 25% of a Fund's net assets to such instruments;
. commit more than 25% of a Fund's net assets to covered options; or
. commit more than 5% of a Fund's net assets to the premiums for put or call
options.
Our options transactions and short sale transactions only consist of techniques
to hedge an unrealized gain on portfolio securities, such as:
1) selling short against the box, which involves selling short securities a Fund
already owns for delivery at a later date;
2) purchasing covered put options on portfolio securities, which allows us to
sell a Fund's securities to the writer (seller) of the option at a set price on
or before the expiration date of the option;
3) selling covered call options, which allows the holder of the options written
by us for a Fund to purchase securities at a set price before the expiration
date; and
4) entering into closing transactions with respect to such options.
If we sell a security short against the box for a Fund, we may protect
unrealized gains, but we may lose the opportunity to profit on such securities
if the price rises. When we purchase covered put options for a Fund, we pay the
premiums for the options. We receive premiums for a Fund when we write (sell)
covered call options. The premiums we receive for a Fund from writing (selling)
covered call options may be completely or partially offset by any declines in
the prices of the underlying securities.
Also, we may purchase stock index options, write covered stock index options and
enter into closing transactions on these options.
We deal only in exchange-traded or over-the-counter options on securities and
stock indexes.
Our futures transactions for the Funds may include instruments such as interest
rate and index futures contracts and options thereon. We may use futures
transactions for several reasons, including: (1) hedging unrealized portfolio
gains; (2) minimizing adverse principal fluctuations in a Fund's debt and
fixed-income securities; or (3) as a means of adjusting exposure to various
markets.
Our ability to use futures and options transactions successfully depends upon
our skill for predicting the level and direction of the securities, options and
futures markets, interest rates and other factors. An incorrect prediction may
make the implementation of the hedging strategy in furtherance of a Fund's
investment objectives difficult. For example, significant differences may exist
between the securities and the options and futures markets that could result in
an imperfect correlation between them. Also, an incorrect prediction on the
changes in the level and direction of interest rates could cause us to have a
lower return for the Fund than it would have had if we had not attempted the
hedging transaction. In the absence of the ability to hedge, however, we might
take portfolio actions in anticipation of the same market movements with similar
investment results, but, presumably, at greater transaction costs.
FOREIGN CURRENCY TRANSACTIONS
Foreign securities have currency risk, meaning the risk that changes in foreign
currency exchange rates and exchange control regulations will affect favorably
or unfavorably the U.S. dollar value of these securities (and any income
generated thereon). To manage this risk and facilitate the purchase and sale of
foreign securities for a Fund, we may engage in foreign currency transactions
involving: (1) the purchase and sale of forward foreign currency exchange
contracts (agreements to exchange one currency for another at a future date);
(2) options on foreign currencies; (3) currency futures contracts; or (4)
options on currency futures contracts. Although we use foreign currency
transactions to protect against adverse currency movements, they involve the
risk that we may not accurately predict the currency movements, which could
adversely affect a Fund's total return. We set forth further information on
foreign securities and currency transactions in the Statement of Additional
Information.
FOREIGN SECURITIES
The AAL Small Cap Stock (up to 10% of net assets), Mid Cap Stock (up to 10% of
net assets), International, Capital Growth (up to 10% of net assets), Equity
Income and Balanced Funds may invest in foreign securities domestically through
depository receipts (i.e., American Depository Receipts ("ADRs")) and securities
of foreign issuers traded on a U.S. national securities exchange or the Nasdaq
National Market. The AAL Balanced (bond sector), High Yield Bond and Bond Funds
may invest up to 20% of their net assets in debt securities of foreign issuers
that are payable in U.S. dollars. The AAL International Fund and The AAL Equity
Income Fund (up to 15% of its net assets) may invest in foreign securities
primarily trading in countries outside of the United States. Foreign securities
may present a greater degree of risk (including risks related to tax provisions
or appropriation of assets) than do securities of domestic issuers.
FOREIGN INVESTING EXPENSES
Investing in foreign securities costs more than investing in U.S. securities due
generally to higher transaction costs, such as the commissions paid per share.
As a result, Funds that invest in foreign securities tend to have higher
expenses, particularly funds that invest primarily in foreign securities (i.e.,
The AAL International Fund). In addition to higher commissions, they generally
have higher advisory and custodial fees. However, you may find investing in a
fund that purchases foreign securities a more efficient way to invest in foreign
securities than investing in individual foreign securities. Higher expenses
attributable to a Fund that invests in foreign securities does not mean that the
Fund has higher expenses than other funds with similar investment policies and
percentages of assets invested in foreign securities.
RISK OF INVESTING IN FOREIGN SECURITIES
Currency Risk
Even though a Fund may hold securities denominated or traded in foreign
currencies, we measure a Fund's performance in terms of U.S. dollars, which may
subject the Fund to foreign currency risk. Foreign currency risk is the risk
that the U.S. dollar value of foreign securities (and any income generated
therefrom) held by a Fund may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Therefore, the
net asset value of a Fund may go up or down as the value of the dollar rises or
falls compared to a foreign currency.
Liquidity Risk
Foreign markets or exchanges tend to have less trading volume than the NYSE or
other domestic stock exchanges or markets, meaning the foreign market may have
less liquidity. The lower liquidity in a foreign market can affect our ability
to purchase or sell blocks of securities and obtain the best price in the
foreign market for a Fund. Foreign markets tend to have greater spreads between
bid and asked prices, trading interruptions or suspensions and brokerage and
other transaction costs. Settlement practices vary from country to country and
many foreign markets have longer settlement periods for their securities in
comparison to domestic securities. These differing practices may cause us to
lose opportunities for favorable purchases elsewhere and interest income. Also,
foreign markets may trade on days when the Funds do not value their portfolios.
This means that a Fund's Net Asset Value can change on days when a shareholder
cannot access his or her account. We may incur extra costs for a Fund when
involved in currency hedging. For example, restrictions on converting a foreign
currency into U.S. dollars may adversely affect the value of a Fund.
Political, Economic and Market Risks
The degree of political and economic stability varies from country to country.
If a country expropriates money from foreigners or nationalizes an industry, a
Fund may lose some or all of any particular investment in that country.
Individual foreign economies may vary favorably or unfavorably from the U.S.
economy in such areas as growth of gross national product, inflation rate,
savings, balance of payments and capital investment, which may affect the value
of a Fund's Investment in any foreign country.
Government Regulation
Many foreign countries do not subject their markets to the same degree and type
of laws and regulations that cover the U.S. markets. Also, many foreign
governments impose restrictions on investments in their capital markets as well
as taxes or other restrictions on repatriation of investment income. The
regulatory differences in some foreign countries make investing or trading in
their markets more difficult and risky.
Non-Uniform Corporate Disclosure Standards
Many countries have laws making information on publicly-traded companies, banks
and governments unavailable, more difficult to obtain, incomplete or
unavailable. The lack of uniform accounting standards and practices among
countries impairs the ability of investors to compare common valuation measures,
such as price/earnings ratios, as applied to securities of different countries.
INVESTMENT RESTRICTIONS
In addition to specific investment restrictions described in the SAI, only a
vote of the majority of the outstanding shares can change:
. except for The AAL Balanced and High Yield Bond Funds, the investment
objective of a Fund;
. the policies on borrowing and lending securities;
. the restriction on concentrating investments in a single industry, which
limits a Fund from investing more than 25% of its net assets (25% of the
total assets for The AAL Small Cap Stock, International, Balanced and High
Yield Bond Funds) in any single industry. This restriction does not apply
to securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities; and
. the restriction requiring issuer diversification by limiting a Fund from
investing more than 5% of its net assets in a single issuer, except that up
to 25% of its net assets may be invested without regard to this limitation.
This restriction does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
With the exception of the fundamental investment policy requiring us to invest
at least 80% of The AAL Municipal Bond Fund's net assets in municipal
securities, the Board of Trustees may change any of the Funds' other investment
policies without shareholder approval. For example, the Board of Trustees may
change the policies regarding specific investments, discussed above (other than
the policies on borrowing and securities lending). We have included a
description of all of the investment restrictions applicable to the Funds in the
Statement of Additional Information.
BOARD OF TRUSTEES
Our Board of Trustees* decides matters of general policy and reviews the
activities of the Adviser and the officers who conduct and supervise the daily
business operations of the Funds.
The Trustees, their business addresses and principal occupations during the past
five years are:
JOHN H. PENDER**
P. O. Box 250
Dunbar, WV 25064
DOB 5/25/30
Chairman of the Board of Trustees and from 1987 through May 1996, President of
the Funds; prior to 1996, Senior Vice President and Chief Investment Officer,
Aid Association for Lutherans (fraternal benefit society) and prior to 1992,
Treasurer
F. GREGORY CAMPBELL
2001 Alford Park Drive
Kenosha, WI 53140
DOB 12/16/39
Trustee; President of Carthage College, Kenosha, WI; Director, Kenosha Hospital
and Medical Center; Chairman, WI Assoc. of Independent Colleges and
Universities; Board Member, Kenosha Area Development; and Board Member, Prairie
High School
RICHARD L. GADY
One Central Park Plaza
Omaha, NE 68102
DOB 2/28/43
Trustee; and Vice President, Public Affairs and Chief Economist, ConAgra, Inc.
(a food and agriculture corporation)
D. W. RUSSLER
P. O. Box 84
Minocqua, WI 54548
DOB 10/28/28
Trustee; from 1984 through 1988, Senior Vice President, Finance and
Administration, NCR Corporation; Director, Capital Markets Assurance Corporation
(reinsurance); and Member, Advisory Board--Saratoga Partners II and III
(corporate buy-out limited partnership)
LAWRENCE M. WOODS
P. O. Box 1860
Worland, WY 82401
DOB 4/14/32
Trustee; and Former Executive Vice President and Director, Mobil Oil Corp.
(international oil company)
RONALD G. ANDERSON**
4321 North Ballard Road
Appleton, WI 54919
DOB 10/2/48
Trustee and President; Senior Vice President and CFO, Aid Association for
Lutherans; President, AAL Capital 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)
JOHN O. GILBERT**
4321 North Ballard Road
Appleton, WI 54919
DOB 8/30/42
Trustee; President and Chief Executive Officer, Aid Association for Lutherans;
Regent, Luther College; Director, Life Office Management Association Inc.
* All of the Trustees except for Mr. Pender are Directors of the AAL Variable
Product Series Fund, Inc..
** Denotes an "interested person" of the Funds as defined in the Investment
Company Act of 1940.
MANAGEMENT OF THE TRUST
THE ADVISER
Under an Investment Advisory Agreement with the Trust, and subject to the
supervision of the Funds' Board of Trustees, we, as the Adviser (AAL CMC),
manage the investment and reinvestment of the Funds' assets, provide the Funds
with personnel, facilities, and administrative services, and supervise the
Funds' daily business affairs. We formulate and implement a continuous
investment program for the Funds consistent with each Fund's investment
objectives, policies and restrictions.
We provide office space as well as executive and other personnel to the Funds.
In addition to investment advisory fees, each Fund incurs the following
expenses: legal, auditing and accounting expenses; trustees' fees and expenses;
insurance premiums; brokers' commissions; taxes and governmental fees; expenses
of issuing and redeeming shares; organizational expenses; expenses of
registering or qualifying shares for sale; postage and printing for reports and
notices to shareholders; fees and disbursements of the Custodian and Transfer
Agent; certain expenses with respect to membership fees of industry
associations; and any extraordinary expenses, such as litigation expenses.
We have engaged Societe Generale Asset Management Corp., 1221 Avenue of the
Americas, New York, NY 10020, to act as Sub-Adviser for The AAL International
Fund. The Sub-Adviser has registered as an investment adviser under the
securities laws. Societe Generale, which is one of France's largest banks,
indirectly owns the Sub-Adviser. Pursuant to the Sub-Advisory Agreement, the
Sub-Adviser, subject to the direction of the Adviser and the Board of Trustees,
determines the securities that The AAL International Fund purchases or sells and
renders other assistance to the Adviser in formulating and implementing the
investment program for the Fund.
Year 2000
Year 2000 is approaching and we are addressing potential problems that could
affect our systems and systems of those of The AAL Mutual Funds' other service
providers, such as the Funds' transfer agent, Firstar Trust Company. Many
computer software systems in use today cannot distinguish the year 2000 from the
year 1900 because of the way the software encodes and calculates dates. We have
formed a committee that is reviewing our systems as well as actively working
with The AAL Mutual Funds' other service providers to address the Year 2000
problem. At this time, however, we cannot assure that these steps will be
sufficient to avoid any adverse impact on the Funds.
PORTFOLIO TRANSACTIONS
As the Adviser (AAL CMC), we direct the placement of orders for the purchase and
sale of the Funds' portfolio securities. In directing orders, we consider a
number of factors to attain what we believe is the best combination of price and
execution for the Funds, including: when we believe that more than one broker or
dealer is capable of providing the best combination of price and execution in a
transaction. Normally, we select a broker or dealer who furnishes research
services.
As the Adviser, we may have other clients for which we are making investment and
order placement decisions similar to the Funds. When making simultaneous
purchases or sales for the Funds and another client, if any, our decisions could
have a detrimental effect on the price or volume of the securities purchased or
sold for the Funds. In other cases, simultaneous purchases or sales of
securities for the Funds and our other clients could provide the Funds with the
ability to participate in volume transactions that may cost less per share or
unit traded than smaller transactions.
BUYING CLASS A AND B SHARES IN THE FUNDS
You can buy Class A and Class B in the Funds through a licensed registered
representative, by mail or wire transfer. Sales charges and ongoing asset based
distribution fees mark the primary differences between Class A and Class B
shares.
We describe the differences between the types of shares below.
CLASS A SHARES
Up Front Sales Charge
You buy Class A shares of each Fund, except for The AAL Money Market Fund, at
net asset value ("NAV") plus a maximum sales charge ("load") of 4.00% of the
public offering price ("POP") incurred at the time of purchase. As a result, we
do not impose a sales charge when an investor redeems Class A shares of a Fund.
We may reduce or waive sales charges on certain purchases. The chart below shows
the sales charge percentage for Class A shares imposed at different dollar level
purchases.
You buy Class A shares of The AAL Money Market Fund at net asset value without a
sales charge and you do not pay a fee upon redemption.
<TABLE>
<CAPTION>
Breakpoints
Your Investment Sales Charge Sales Charge 50%Sales 50% Sales
Amount as a % of POP* as a % of Net Charge as a Charge as a %
Amount Invested* % of POP* of Net Amount
Invested*
<S> <C> <C> <C> <C>
Less than $25,000 4.00% 4.17% 2.00% 2.04%
$25,000
but less than $50,000 3.75% 3.90% 1.88% 1.91%
$50,000
but less than $100,000 3.00% 3.09% 1.50% 1.52%
$100,000**
but less than $250,000 2.00% 2.04% 1.00% 1.01%
$250,000
but less than $500,000 1.00% 1.01% 0.50% 0.50%
$500,000 and up* 0.00% 0.00% 0.00% 0.00%
</TABLE>
* Registered Representatives may receive compensation not exceeding 75% of the
sales charge on amounts purchased and may receive compensation not exceeding .50
of 1% of amounts invested at $500,000 and up.
** You should purchase Class A shares at this level of investment and above.
Reducing Your Sales Charge
We may reduce your sales charges on purchases of Class A shares under certain
circumstances, described below. If you are eligible for one of these reductions,
you must tell us or your Registered Representative at the time you purchase
Class A shares or you may or may not receive the reduction. Trustees, directors
and employees of the Funds and the Adviser and Sub-Adviser, as well as persons
licensed to receive commissions for sales of The Funds may not pay a sales
charge on their purchases or on purchases made by family members residing with
them. We reserve the right to stop or change these reductions at any time.
50% Reduction: Non-profit organizations, charitable trusts, charitable remainder
unitrusts, endowments, AAL branches and congregations pay only 50% of the normal
sales charge so long as there is a meaningful Lutheran affiliation. The
reduction does not apply to 403(b)(7) Retirement Plan Accounts.
Right of Accumulation: You can combine all your Class A, Class B and
Institutional share purchases, including the purchases of family members who
live with you, when computing your current sales charge for Class A shares.
Eligible shares for combination in computing the sales charge include those
contained in individual, joint tenant, gift/transfer to minor, trust and IRA
accounts. Employer sponsored plans can link the shares in the plan for purposes
of calculating a sales charge reduction. Rights of accumulation include the
value of all Class A shares at the public offering price, all Class B shares,
all Institutional shares, and reinvested dividends and capital gains.
Letter of Intent
To reduce your sales charge on purchases above the breakpoints listed above, you
can sign a letter of intent if you intend to invest more than the dollar amount
at any one breakpoint during the next 13 months. Class A or Class B share
purchases fulfill the Letter of Intent, but you receive a reduced sales charge
on Class A shares only. You can include purchases in accounts you have linked
for purposes of the Right of accumulation, and you can back date a Letter of
Intent to include purchases made in the last 90 days. However, we do not
recalculate the sales charge on prior purchases.
You do not have any obligation to buy additional shares. During the Letter of
Intent period, we will escrow shares totaling 5% of the investment goal. If for
some reason you do not fulfill the Letter of Intent within the 13-month period,
we will sell escrowed shares to cover any additional sales charges due from you.
You should sign only one Letter of Intent for all accounts combined under Right
of Accumulation.
Share purchases in The AAL Money Market Fund do not apply toward your Letter of
Intent, unless you paid a sales charge and exchanged them into shares of The AAL
Money Market Fund.
CLASS B SHARES
Contingent Deferred Sales Charge
You buy Class B shares of each Fund at net asset value with no initial sales
charge. However, you may pay a contingent deferred sales charge (expressed as a
percentage of the lesser of the current net asset value or original cost) of up
to 5% if you redeem shares within five years after purchase. We do not impose a
contingent deferred sales charge on shares you acquire through the reinvestment
of dividends and capital gains. To reduce your cost, when you redeem shares in a
Fund, you will redeem either shares that are not subject to a contingent
deferred sales charge (i.e., those bought through reinvestment of dividends and
capital gains) or shares with the lowest contingent deferred sales charge. We
waive the contingent deferred sales charge upon redemption of shares following
the death or disability of a shareholder or for mandatory or hardship
distributions from retirement plans, IRAs and 403(b) plans or to meet certain
retirement plan requirements. Also, we reduce the amount of a contingent
deferred sales charge depending on the amount of years from the purchase of
Class B shares until the sale of those shares according to the following table:
Years After Deferred Sales Charge on
Purchase Shares Sold*
1st year 5.00%
2nd year 4.00%
3rd year 3.00%
4th year 2.00%
5th year 1.00%
After 5th year 0.00%
*Registered Representatives may receive compensation upon the sale of Class B
shares in the amount of up to 1.25% of the purchase amount even if such shares
are not redeemed within five years of purchase and thus not subject to a CDSC.
We base the sales charge on the lesser of the net asset value of the shares at
the time of the purchase or at the time of the sale.
You should not consider buying Class B shares if you can elect the 50% reduction
for purchases of Class A shares or you are investing $100,000 or more in the
Funds. ALSO, BECAUSE OF THE HIGHER EXPENSES, YOU SHOULD NOT CONSIDER BUYING
CLASS B SHARES OF THE AAL MONEY MARKET FUND UNLESS YOU INTEND TO EXCHANGE THEM
FOR OTHER CLASS B SHARES OR AS PART OF THE AAL MUTUAL FUNDS CAPITAL BUILDER PLAN
(SEE PAGE __).
Conversion to Class A shares
Your Class B shares automatically convert to Class A shares after 5 years from
the purchase date, reducing future annual expenses. Class B shares provide the
benefit of putting all of your dollars to work from the time you make your
investment. However, until your Class B shares convert to Class A shares, you
will have a higher expense ratio, receive lower dividends and may have a lower
net asset value than Class A shares due to the higher 12b-1 fees.
You should consider the amount and intended length of time of your investment
when determining which share class would benefit you the most. In general, if
you intend to make a large investment, thus qualifying for a reduced sales
charge, you might consider purchasing Class A shares. If you intend to make a
smaller investment, you might consider Class B shares because 100% of your
purchase is invested immediately.
PURCHASE PRICE
The price of a Fund's share is based on its net asset value. We determine a
Fund's net asset value (NAV) per share once daily at the close of trading on the
New York Stock Exchange (NYSE) (normally 3:00 p.m. Central Time). If our
Transfer Agent receives your order in proper form prior to the close of trading
on the NYSE, you will receive that day's price. If not, you will receive the
price when it is next calculated. The share price (net asset value per share)
will decline on the ex-dates when The AAL Small Cap Stock, Mid Cap Stock,
International, Capital Growth, Equity Income and Balanced Funds distribute
dividends. Capital gains reduce the share prices of all Funds by the amount of
the distributions. If you buy shares before the record date ("buying the
dividend"), you will pay the full price for shares and then receive a portion of
the price back as a taxable distribution.
MINIMUM PURCHASE AMOUNT
PER ACCOUNT PER TRANSACTION
Minimum
Purchase Amount
Per Account Initial Additional
Per Transaction Purchase Purchase
- ---------------------------------------------------------------
Regular Account $1,000 $ 50
IRA $ 250 $ 50
Automatic
Investment Plan $ 0 $ 25
Letter of Intent
(over a 13-month period) $25,000
- ---------------------------------------------------------------
The Funds may waive the minimum investment amount needed to open or add to an
account for certain employer-sponsored accounts.
OPENING A NEW ACCOUNT
Your AAL Capital Management Corporation Registered Representative is ready to
help you open a new account. If you do not know the name of your Registered
Representative, please call the Mutual Fund Service Center at 800-553-6319. The
Telecommunications Device for the Deaf (TDD) is 800-684-3416.
To open your account, just follow these steps:
1. After reviewing this prospectus, complete an AAL Mutual Funds Application
and New Account Form, which should be attached to the prospectus, for every
different account registration. For example, you need separate applications
for an individual account in The AAL Bond Fund and an IRA invested in The
AAL Bond Fund. Remember to designate whether you are purchasing Class A
shares or Class B shares. If you do not complete the application properly,
your purchase may be delayed or rejected;
2. Make your check payable to the Fund you are buying, for example, "The AAL
Bond Fund." If you are buying more than one Fund, make your check payable
to "THE AAL MUTUAL FUNDS." DO NOT MAKE YOUR CHECK PAYABLE TO AAL OR AAL
CAPITAL MANAGEMENT CORPORATION; and
3. Mail your completed application and check to:
THE AAL MUTUAL FUNDS
222 W. COLLEGE AVE.
P. O. BOX 8004
APPLETON, WI 54913-8004.
BUYING SHARES FOR THE FIRST TIME BY WIRE
If your bank is a member of or has a corresponding relationship with a member of
the Federal Reserve System, you can buy shares of the Funds by wire transfer by
following these steps:
1. Call AAL Capital Management Corporation at 800-553-6319 (The AAL Mutual
Funds Service Center ("Service Center")) and provide the following
information:
. your account registration;
. the name of the Fund(s) in which you want to invest and whether you wish to
buy Class A or Class B shares;
. your address;
. your Social Security or tax identification number;
. the dollar amount;
. the name of the wiring bank; and
. the name and the telephone number of the person at your bank who the Funds
can contact about your purchase.
We must receive your wire order before the closing of the NYSE (normally 3:00
p.m. Central Time) to receive that day's price.
2. Instruct your bank to use the following instructions when wiring funds:
WIRE TO: FIRSTAR BANK MILWAUKEE, N. A.
ABA #075000022
CREDIT: FIRSTAR TRUST COMPANY ACCOUNT 112-952-137
FURTHER CREDIT: NAME OF FUND (SHAREHOLDER ACCOUNT NUMBER) (SHAREHOLDER
REGISTRATION)
Please call (800) 553-6319 prior to sending the wire in order to obtain a
confirmation number and to ensure prompt and accurate handling of funds.
The Fund and its transfer agent are not responsible for the consequences of
delays resulting from the banking or Federal Reserve Wire system, or from
incomplete wiring instructions.
3. Complete The AAL Mutual Funds Application and mail it immediately to:
THE AAL MUTUAL FUNDS
222 W. COLLEGE AVE.
P. O. BOX 8004
APPLETON, WI 54913-8004.
ACCOUNT REGISTRATION
How you register your account with the Funds can affect your legal interests as
well as the rights and interests of your family and beneficiaries. You should
always consult with your legal and/or tax adviser to determine the account
registration that best meets your needs. You must clearly identify the type of
account you want on your AAL Mutual Funds Application. Some account
registrations may require additional documents.
ACCOUNTS FOR RETIREMENT SAVINGS
AAL members, their enterprises and Lutheran organizations may establish their
own individual or business retirement plans. These accounts may offer you tax
advantages. You should consult with your legal and/or tax adviser before you
establish a retirement plan.
A third-party maintenance fee may apply to some retirement accounts. Please
review plan documents for more information.
Your AAL Capital Management Corporation Registered Representative will provide
you with all the materials, documents and forms you need, and will work with you
in establishing your retirement plan from among these choices:
. Traditional IRA (Individual Retirement Account);
. "rollover" IRA;
. Roth IRA -- Available in 1998 (annual contributions are not tax deductible
but distributions may not be subject to income tax);
. SEP-IRA (Simplified Employee Pension Plan); No new plans may start after
1996, but existing plans may continue;
. SARSEP-IRA (Salary Reduction Simplified Employee Pension Plan). No new
plans may start after 1996, but existing plans may continue;
. SIMPLE-IRA (Savings Incentive Match Plan for Employees);
. Education IRA -- Available in 1998 (annual contributions are not tax
deductible, but distributions may not be subject to income tax);
. 403(b)(7) retirement plan account (legal restrictions apply to your ability
to withdraw funds from this account); and
. qualified retirement plans.
Please note that The AAL Municipal Bond Fund usually is not an appropriate
investment for a retirement account.
PRESTIGE ACCOUNT
We provide investors who maintain substantial account balances in one or a
combination of The Funds with additional benefits. You will have exclusive
access to our Prestige Account Network, personalized retirement or education
planning analysis, complimentary investment information, a Prestige Account
organizer and more. Your AAL Capital Management Corporation Registered
Representative can provide you with more detailed information.
BUYING ADDITIONAL SHARES FOR YOUR ACCOUNT
After you have opened an account with The AAL Mutual Funds, you can make
additional investments of $50 or more per account by mail, telephone or wire.
Please put your name and your AAL Mutual Funds Account number on the face of all
investment checks, and make sure your checks are payable to the specific Fund in
which you are investing (for example, "The AAL Bond Fund"). If you are investing
in more than one Fund, make your check payable to "THE AAL MUTUAL FUNDS." DO NOT
MAKE YOUR CHECK PAYABLE TO AAL OR AAL CAPITAL MANAGEMENT CORPORATION. Some
retirement accounts, such as the 403(b)(7) Retirement Plan, may allow you to
make investments only by deferring part of your salary.
BY MAIL
REGULAR MAIL
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
615 E. MICHIGAN ST.
P. O. BOX 2981
MILWAUKEE, WI 53201-2981
EXPRESS MAIL/PRIVATE DELIVERY
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
MUTUAL FUNDS SERVICES, THIRD FLOOR
615 E. MICHIGAN ST.
MILWAUKEE, WI 53202
BY WIRE
Follow the directions listed under "Buying Shares for the First Time by Wire" on
page 31.
BY TELEPHONE
Before you can buy additional shares by telephone, you must have selected the
Request for Telephone Purchase option on the application. Once you have selected
this option, you can call the Mutual Fund Service Center and we will withdraw
money from your bank checking or savings account to make your investment. You
pay the next price computed after the Funds have received your investment from
your bank, which is usually three business days after you authorize the
transfer. If you need to invest sooner, you should consider making a bank wire
purchase.
AUTOMATIC INVESTMENT PLANS
To make regular investing more convenient, you can open an automatic investment
plan with no initial investment and a minimum of $25 per account per transaction
after you start your plan. Your AAL Capital Management Corporation Registered
Representative is ready to help you set up one of the following plans.
The Bank Draft Plan allows you to make regular investments in The AAL Mutual
Funds directly from your checking or savings account. The following rules and/or
guidelines apply:
. You can select up to two transaction dates per month (at least 10 days
apart). If you do not select the date(s), the money will automatically be
withdrawn from your bank account on the 5th of the month;
. To start the plan or change your bank account, you must notify us in
writing at least 13 business days prior to the transaction date. All bank
account owners must sign the bank draft plan card;
. To stop or change the amount of your plan, you must notify us in writing or
via telephone at least 5 business days prior to the transaction date; and
. Make sure you have enough money in your bank account to make the investment
so you can avoid paying any possible fees from your bank or our Transfer
Agent.
The Capital Builder Plan allows you to transfer money every month from your AAL
Money Market Fund Account into another AAL Mutual Funds Account. The following
rules and/or guidelines apply:
. You can select the transaction date. If you don't select the date, we will
automatically transfer the money from your account on the 15th of the
month;
. To start the plan, you must notify us in writing at least 24 hours prior to
the transaction date. You must have all account owners sign the Capital
Builder Plan Card; and
. To stop or change the amount of your plan, you must tell us at least 24
hours prior to the transaction date.
The Payroll Deduction Savings and Investment Plan allows employees of AAL,
employees of Lutheran-affiliated institutions and Lutheran employees whose
employers agree to invest in The AAL Mutual Funds through direct deduction from
their paychecks or commission checks.
All payroll deductions for retirement plan accounts will be considered current
year contributions unless we are notified in writing, via telephone or e-mail.
The Government Allotment Plan allows Lutheran Social Security recipients,
federal employees and military personnel to invest in The AAL Mutual Funds
through direct deduction from their paychecks.
Using The AAL Mutual Funds Automatic Investment Plans, you may implement a
strategy called dollar cost averaging. Dollar cost averaging involves investing
a fixed amount of money at regular intervals. When you "dollar cost average,"
you purchase more shares when the price is low and fewer shares when the price
is high. Dollar cost averaging does not ensure a profit or protect against a
loss during declining markets. Because such a program involves continuous
investment regardless of changing share prices, you should consider your ability
to continue the program through times when the share prices are low.
ADDITIONAL INFORMATION ABOUT BUYING SHARES
Earning Income
You begin earning income, if any, on your shares on the business day following
the day our Transfer Agent receives your payment.
Purchases
Your purchase must be in U.S. dollars and your check must be drawn on a U.S.
bank. We do not accept cash or traveler's checks. If your check does not clear,
we will cancel your purchase and hold you liable for any losses and any
applicable fees. When you buy shares by any type of check, electronic funds
transfer or automatic investment purchase, you may not be able to redeem the
shares you purchased for 12 days or until your check has cleared, whichever is
later. This does not limit your right to redeem shares. Rather, it operates to
make sure that payment for the shares redeemed has been received by the Transfer
Agent.
Confirmation
We generally mail written confirmation of your purchases, except for The AAL
Money Market Fund, within two business days following the date of your purchase.
We mail confirmation of additional purchases in The AAL Money Market Fund
monthly. We mail confirmation of your automatic investment plan purchases at
least quarterly.
Share Certificates
We issue share certificates only upon written request, and then only for full
shares. You must make a new written request for a share certificate each time
you purchase shares. We do not charge a fee to issue share certificates. If you
have asked for or have received share certificates, you cannot use certain
shareholder services, including wire, check and telephone redemption, share
exchange and any systematic withdrawal. Before you can redeem, transfer or
exchange your shares, you must deliver the share certificates to our Transfer
Agent in negotiable form (with a signature guarantee). We may not have share
certificates available for some retirement accounts.
Other Information
The U.S. Postal Service or private delivery services are not agents of the
Funds, the Distributor, or the Transfer Agent. We do not legally receive your
purchase application or your request for redemption when you deposit them in the
mail, send them with a private delivery service or when you deposit them in our
Post Office Box. We must have physical possession of your request to consider
your request received. Current law will determine the legal effect of posting
for deadline purposes.
We reserve the right to suspend the offering of shares for a period of time and
the right to reject any specific purchase of shares.
SELLING (REDEEMING) YOUR SHARES
You can sell your shares on any business day. When you sell your shares you
receive the net asset value per share, except for Class B shares for which you
will receive the net asset value per share minus the CDSC, if any, depending on
how long you have held the shares redeemed. If we receive your request in good
order, which means including all the information listed below, before the close
of the NYSE (normally 3:00 p.m. Central Time) you will receive that day's price.
If we receive your redemption request in good order on a holiday, weekend or a
day the NYSE is closed, we will process your transaction on the next business
day. You can sell shares several ways. Please note that transfers via Electronic
Funds Transfer (EFT) generally take up to three business days to reach your bank
account.
BY MAIL
Please include the following in your redemption request:
. name(s) of the account owner(s);
. account number(s);
. amount you want to receive or the number of shares you want to sell (for a
Class B share redemption we will redeem any additional shares required for
the CDSC to comply with your request for a specific amount);
. tax withholding information, if required, for retirement accounts; and
. signatures of all account owners.
YOU MUST HAVE YOUR SIGNATURE GUARANTEED IF:
1. You want to sell shares with a value of more than $25,000;
2. You want the proceeds sent to an address other than the one listed for your
account;
3. You want the check payable to someone other than the account owner(s); or
4. You hold share certificates (you must return the signed certificates with
your request).
You can usually obtain a signature guarantee at commercial banks, trust
companies or broker- dealers. A SIGNATURE GUARANTEE IS NOT THE SAME THING AS A
NOTARIZED SIGNATURE. Accounts held by a corporation, trust, estate,
custodianship, guardianship, partnership or pension and profit sharing plan may
require more documentation.
Mail to:
REGULAR MAIL
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
P. O. BOX 2981
615 E. MICHIGAN ST.
MILWAUKEE, WI 53201-2981
EXPRESS MAIL/PRIVATE DELIVERY
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
MUTUAL FUNDS SERVICES, THIRD FLOOR
615 E. MICHIGAN ST.
MILWAUKEE, WI 53202
BY TELEPHONE
To make investing in the Funds more convenient, you may buy, sell or exchange
shares by telephone. We have established reasonable procedures to protect
against anyone who attempts to use the telephone service fraudulently. Please be
aware, however, that The AAL Mutual Funds, AAL Capital Management Corporation,
the Custodian, the Transfer Agent or any of their employees will not be liable
for losses suffered by you that result from following telephone instructions
reasonably believed to be authentic after verification pursuant to these
procedures. Once you have made a telephone request you cannot cancel or modify
it! During periods of extreme volume caused by dramatic economic or stock market
changes, or when the telephone system is not fully functional, you may have
difficulty reaching us by telephone and telephone transactions may be difficult
to implement at those times. We reserve the right to temporarily discontinue or
limit the telephone purchase, redemption or exchange privileges at any time
during such periods.
The following rules and/or guidelines for selling by telephone apply:
. You must call the Mutual Fund Service Center at 800-553-6319;
. You must provide a form of personal identification to confirm your
identity;
. You can sell up to $25,000 worth of shares;
. The Funds will mail a check only to the person(s) named on the account
registration and only to the address on the account;
. Retirement plan accounts are not eligible;
. You cannot sell shares in certificate form by telephone;
. You can do only one telephone redemption within any 30-day period for each
authorized account;
. Telephone redemptions are not available if the address on the account has
been changed in the preceding 60 days; and
. If we receive your request in good order before the close of the NYSE
(normally 3:00 p.m. Central Time), you will receive that day's price.
BY WIRE
The following rules and/or guidelines for selling by wire apply:
. You must give us written authorization, including the signatures of all the
owners of the account, on The AAL Mutual Funds Application or Change Form;
. You can make a wire redemption for any amount;
. You pay a $12.00 fee for each wire redemption;
. We must receive your request in good order before the close of the NYSE
(normally 3:00 p.m. Central Time) for you to receive that day's price; and
. Wire redemptions may not be available to you for all retirement account
plans.
SYSTEMATIC WITHDRAWAL PLAN (USUALLY ONLY APPROPRIATE FOR CLASS A SHARES)
You can have money automatically withdrawn from your AAL Mutual Funds account(s)
on a regular basis by using our systematic withdrawal plan. The plan allows you
to receive funds or pay a bill at regular intervals. The following rules and/or
guidelines apply:
. You need a minimum of $5,000 in your account to start the plan;
. You can select the date(s) on which the money is withdrawn. If you don't
select the date(s), we will withdraw the money automatically from your
account on the 15th of the month:
. To start the plan or change the payee(s), you must notify us in writing at
least 13 business days prior to the first withdrawal and you must have all
account owner(s) sign the appropriate form;
. To stop or change your plan, you must notify us at least 5 business days
prior to the next withdrawal; and
. Because of sales charges, you must consider carefully the costs of frequent
investments in and withdrawals from your account.
THE AAL MONEY MARKET FUND CHECKS (CLASS A SHARES ONLY)
You can write checks on your AAL Money Market Fund account, except for Class B
shares, if you complete a check writing signature card and agreement. You can
request checks on your AAL Mutual Funds Application or in writing. We do not
charge a fee for supplying your first set of checks, but charge a fee for each
additional packet of checks. The following rules and/or guidelines apply:
. The checks you write on The AAL Money Market Fund must be for $500 or more
(Because the Fund is not a bank, some features, such as stop payment, are
not available);
. Our Transfer Agent may impose reasonable fees for each check that is
returned;
. We do not return your canceled checks. For a fee, our Transfer Agent will
send a copy of your check to you at your request;
. Unless you purchased shares by bank wire, you must wait 12 days after you
purchase The AAL Money Market Fund shares to write checks against that
purchase; and
. You need a written request--NOT A CHECK--to close an AAL Money Market Fund
account. Your written request will require a signature guarantee to close
accounts over $25,000.
Closing Small Accounts
All AAL Mutual Funds account owners share the high cost of maintaining accounts
with low balances. To reduce this cost, we reserve the right, subject to legal
restrictions, if any, to close an account when, due to a redemption, its value
is less than $250. This does not apply to retirement plan accounts. We will
notify you in writing before closing any account, and you will have 30 days to
add money to bring the balance up to $250.
Reinstatement Privilege (Class A Shares Only)
You have 60 days after you sell shares to reinvest the dollar amount you
redeemed without having to pay another sales charge. You will pay the net asset
value per share on the day when you made your reinvestment and not on the day
when you sold your investment. The following rules and/or guidelines apply:
. You may use this privilege only ONCE per account;
. You must send a written request and a check for the amount you wish to
reinvest to the Funds Transfer Agent:
REGULAR MAIL
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
P. O. BOX 2981
615 E. MICHIGAN ST.
MILWAUKEE, WI 53201-2981
EXPRESS MAIL/PRIVATE DELIVERY
THE AAL MUTUAL FUNDS
C/O FIRSTAR TRUST COMPANY
MUTUAL FUNDS SERVICES, THIRD FLOOR
615 E. MICHIGAN ST.
MILWAUKEE, WI 53202;
. The dollar amount you reinvest cannot exceed the dollar amount you sold;
. The sale of your shares may be a taxable event despite the reinstatement;
and
. The reinstatement privilege does not apply to qualified retirement plan
accounts (i.e., 403(b) and 401(k) accounts).
EXCHANGE PRIVILEGE
You may exchange shares in an AAL Mutual Fund for shares in another AAL Mutual
Fund without paying any additional sales charge, if you initially paid a sales
charge. For example, if you had purchased Class A shares of the AAL
International Fund and paid the applicable sales charge and wanted to exchange
them for Class A shares of The AAL Bond Fund, you could do so without paying an
additional sales charge. However, if you initially purchased Class A shares of
The AAL Money Market, where you would not have had to pay an initial sales
charge, you would not be able to exchange these shares for another Fund without
paying the applicable sales charge. Also, if you had exchanged Class A Shares in
a Fund where you had to pay a sales charge into Class A shares of The AAL Money
Market Fund (so called "privileged shares" once exchanged for Money Market Fund
Shares), you would not have to pay an additional sales charge if you exchanged
these shares for Class A Shares in another fund. Class B shares are purchased at
net asset value without a sales charge, so the issue of paying additional sales
charges does not apply when exchanging Class B Shares. The following rules
and/or guidelines apply:
. Minimum investment rules may apply when you open a new account by
exchanging shares, and you may have to submit a new application (i.e., you
must exchange at least $1,000 worth of shares to another Fund and fill out
a new account form, if you have not invested shares in the other AAL Mutual
Fund account before);
. You can exchange for the same class of shares only (for example, Class A
shares for Class A shares and Class B shares for Class B shares);
. You may only exchange into Funds that are legally available for sale in
your state;
. You may have a taxable gain or loss as a result of an exchange;
. We reserve the right to end this privilege if you make more than 12
exchanges in a year;
. We reserve the right to change or end this privilege upon 60 days notice, or
suspend this privilege without notice when economic or market changes make
it difficult to carry out such transactions; and
. If you have share certificates, you need to sign the certificates, have your
signature guaranteed and return the certificates with your request.
BY MAIL
Please include the following in your request:
. name(s) of the account owner(s);
. account number(s);
. amount of shares (or dollar amount) you want to exchange;
. the name of the Fund you are exchanging into; and
. signatures of all account owners.
BY TELEPHONE
The guidelines for exchanging by telephone are:
. You can exchange shares by calling the Mutual Fund Service Center at
800-553-6319;
. When you call us, Mutual Fund Service Representatives will ask for a form
of personal identification to confirm your identity; and
. If we receive your request, in good order, before the close of the NYSE
(normally 3:00 p.m. Central Time), you will receive that day's price.
NET ASSET VALUE (NAV)
We compute the net asset value of a Fund share by adding up the value of the
individual Fund's assets (i.e., stocks and bonds in the Fund's portfolio),
subtracting the Fund's liabilities and dividing the balance by the total number
of shares outstanding. We compute the net asset value of a Fund at the end of
the day after trading on the NYSE closes (normally 3:00 p.m. Central Time). We
do not calculate the net asset value for the Funds on the days when the NYSE is
not open.
We value (or price) securities owned by a Fund at current market value. For
securities with readily available market quotations, we use the quotations to
price the security. If a security does not have a readily available quotation,
we value the security as determined in good faith by or under the direction of
the Board of Trustees. The Board of Trustees may approve the use of pricing
services to assist us in the determination of net asset values.
We value all securities held by The AAL Money Market Fund and money market
instruments with a remaining maturity of 60 days or less held by the other Funds
on an amortized cost basis. We comply with SEC requirements for the use of this
valuation method. For The AAL Money Market Fund, this method of calculation
facilitates, but does not assure, maintaining a constant net asset value of
$1.00 per share.
DIVIDENDS, DISTRIBUTIONS AND TAXES
As the Funds, we endeavor to qualify annually for, and elect tax treatment
applicable to, a regulated investment company under Subchapter M of the Internal
Revenue Code ("Code"). Pursuant to the requirements of the Code, we intend to
distribute substantially all of the Funds' net investment income and net
realized capital gains, if any, less any available capital loss carryover, to
its shareholders annually. We do this to avoid paying income tax on the Funds'
net investment income and net realized capital gains or being subject to a
federal excise tax on undistributed net investment income and net realized
gains. Annually, we intend to comply with all of the requirements to qualify as
a regulated investment company for each Fund. We provide you with full
information on dividends and capital gains distributions for each Fund on an
annual basis.
Below, we provide you with a general description of the distribution policies
and some of the tax consequences for the Funds' shareholders. You should always
check with your tax adviser to determine whether any dividends and distributions
paid to you by a Fund are subject to any taxes, including state and local taxes.
THE AAL SMALL CAP STOCK, MID CAP STOCK, INTERNATIONAL, CAPITAL GROWTH, EQUITY
INCOME, BALANCED, HIGH YIELD BOND, BOND AND MONEY MARKET FUNDS
The dividends from net investment income of each of these Funds, including net
short-term capital gains, are taxable as ordinary income to shareholders whether
paid in additional shares or in cash. Any long-term capital gains distributed to
shareholders are taxable as capital gains to shareholders, whether they receive
them in cash or in additional shares, and regardless of the length of time a
shareholder has owned the shares.
We distribute substantially all net investment income and any net realized
capital gains, if any, for the Funds as follows:
Fund Dividends (if any) Capital Gains (if any)
================================================================================
The AAL Small Cap Stock Fund annually annually
The AAL Mid Cap Stock Fund annually annually
The AAL International Fund annually annually
The AAL Capital Growth Fund semiannually annually
The AAL Equity Income Fund quarterly annually
The AAL Balanced Fund quarterly annually
The AAL High Yield Bond Fund monthly annually
The AAL Municipal Bond Fund monthly annually
The AAL Bond Fund monthly annually
The AAL Money Market Fund monthly annually
The AAL Bond, Municipal Bond, High Yield Bond and Money Market Funds accrue
income dividends daily.
THE AAL MUNICIPAL BOND FUND
Dividends derived from the interest earned on municipal securities constitute
"exempt-interest dividends" and are generally not subject to federal income tax.
We accrue dividends daily and pay these dividends monthly for The AAL Municipal
Bond Fund. We pay the capital gains for the Fund at least annually. Realized
capital gains on municipal securities are subject to federal income tax. Thus,
shareholders will be subject to taxation at ordinary rates on the dividends they
receive that are derived from net short-term capital gains. Distributions of net
long-term capital gains will be taxable as long-term capital gains regardless of
the length of time a shareholder holds them. We may, for temporary defensive
purposes, invest in short-term taxable securities for the Fund. Shareholders of
this Fund are subject to federal income tax at ordinary rates on any income
dividends they receive that are derived from interest on taxable securities.
For shareholders who are receiving Social Security benefits, the federal
government requires you to add tax-exempt income, including exempt-interest
dividends from this Fund, to your taxable income in determining whether a
portion of your Social Security benefits will be subject to federal income tax.
The Internal Revenue Code provides that every person required to file a tax
return must report, solely for informational purposes, the amount of
exempt-interest dividends received from the Funds during the taxable year.
TAX CONSIDERATIONS
Federal law requires us to withhold 31% of a shareholder's reportable payments
(which include dividends, capital gain distributions and redemption proceeds)
for those who have not properly certified that the Social Security or other
taxpayer identification number they provided is correct and that he or she is
not subject to backup withholding. We do not provide information on state and
local tax consequences of owning shares in the Funds.
REINVESTMENT OF FUND DISTRIBUTIONS
You can reinvest all of your income dividends and/or capital gains distributions
into the Funds at net asset value and pay no up-front (Class A shares) or
contingent deferred (Class B shares) sales charges. You also can have your
distributions paid in cash. When you receive a distribution you may have to pay
taxes whether or not you reinvested them or had them paid out to you in cash. If
you have requested cash distributions and we cannot locate you, we will reinvest
your dividends.
DISTRIBUTION FEES
In addition to the sales charge deducted at the time of purchase, the Investment
Company Act of 1940, Rule 12b-1, thereunder, authorizes us pursuant to a Rule
12b-1 Distribution Plan for the Funds ("12b-1 Distribution Plan" or "Plan") to
use a portion of the Funds' assets to cover the costs of certain activities
relating to the distribution of its shares to investors.
The 12b-1 Distribution Plan permits us to reimburse the Distributor for expenses
incurred in distributing the Funds' shares to investors, which includes expenses
relating to: sales representative compensation (excluding the initial sales
charge); advertising; preparation and distribution of sales literature and
prospectuses to prospective investors; implementing and operating the Plan; and
performing other promotional or administrative activities on behalf of the
Funds.
Pursuant to the Plan, we may reimburse the Distributor for overhead expenses
incurred in distributing the Funds' shares. We may not reimburse the Distributor
for expenses of past fiscal years or in contemplation of expenses for future
fiscal years. We may not use distribution fees we pay for one Fund to finance
the distribution of shares for another Fund.
Except for The AAL Money Market Fund, we charge a service fee of up to 0.25 of
1% of the average daily net assets of a Fund for Class A and Class B shares. For
The AAL Money Market Fund, we charge a service fee of up to 0.125 of 1% of the
average daily net assets for Class A and Class B shares. We use the shareholder
servicing fee to compensate for certain shareholder services. We charge the
following 12b-1 distribution and servicing fees.
DISTRIBUTION FEE
Fund Class A shares Class B shares
- ---------------------------------------------------------------------
The AAL Small Cap Stock Fund None 0.75%
The AAL Mid Cap Stock Fund None 0.75%
The AAL International Fund None 0.75%
The AAL Capital Growth Fund None 0.75%
The AAL Equity Income Fund None 0.75%
The AAL Balanced Fund None 0.75%
The AAL High Yield Bond Fund None 0.75%
The AAL Municipal Bond Fund None 0.75%
The AAL Bond Fund None 0.75%
The AAL Money Market Fund None 0.75%
SERVICE FEE
Fund Class A shares Class B shares
- ---------------------------------------------------------------------
The AAL Small Cap Stock Fund 0.25% 0.25%
The AAL Mid Cap Stock Fund 0.25% 0.25%
The AAL International Fund 0.25% 0.25%
The AAL Capital Growth Fund 0.25% 0.25%
The AAL Equity Income Fund 0.25% 0.25%
The AAL Balanced Fund 0.25% 0.25%
The AAL High Yield Bond Fund 0.25% 0.25%
The AAL Municipal Bond Fund 0.25% 0.25%
The AAL Bond Fund 0.25% 0.25%
The AAL Money Market Fund 0.125% 0.125%
SHAREHOLDER MAINTENANCE AGREEMENT
The Board of Trustees authorizes us to contract with AAL Capital Management
Corporation for certain shareholder maintenance services. AAL Capital Management
Corporation receives an annual fee for providing these services. This fee is
based upon, and limited by, the difference between the current account fees
charged and the normal full-service fee schedule published by our Transfer
Agent. It also includes reimbursement for out-of-pocket costs including postage
and telephone charges. This account differential, including reimbursement for
expenses, is currently $4.30 per account per year.
YIELD AND PERFORMANCE INFORMATION
From time to time, we calculate and advertise performance information for
different historical periods of time, by quoting yields or total returns
designed to inform you of the performance of a Fund. Whenever we advertise
performance, we include standardized yield and total return information
calculated in accordance with methods established by the Securities and Exchange
Commission. We may include other total return calculations, if we feel that you
would find such total return calculations useful in evaluating a Fund's
investment performance. We base yields and total returns on historical
performance. You should not use such historical performance information as an
indication of future performance. Your investment return and the principal value
of your investments (except for The AAL Money Market Fund, for which we intend
to maintain at a constant $1.00 net asset value) will fluctuate. At the time you
sell (redeem) your investment, its value may be worth more or less than your
original cost.
STANDARDIZED YIELD AND TOTAL RETURNS
Whenever we advertise performance, we include standardized yield and total
return quotations calculated in accordance with rules of the Securities and
Exchange Commission, in the manner described in the following paragraphs.
THE AAL MONEY MARKET FUND STANDARDIZED YIELD AND STANDARDIZED EFFECTIVE YIELD
We may advertise a standardized yield and a standardized effective yield for The
AAL Money Market Fund. We base both yield figures on historical earnings and do
not intend for these figures to indicate future performance.
The standardized yield of the Fund refers to the income generated by an
investment in the Fund over the seven-day period shown in the advertisement. The
income, less expenses, is then annualized, which means that the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the beginning
investment value.
We calculate the standardized effective yield similarly but, when annualized, we
assume that any income earned by the Fund is reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of the
assumed reinvestment.
THE AAL SMALL CAP STOCK, MID CAP STOCK, INTERNATIONAL, CAPITAL GROWTH, EQUITY
INCOME, BALANCED, HIGH YIELD BOND, MUNICIPAL BOND AND BOND FUNDS--STANDARDIZED
CURRENT YIELD
Except for The AAL Money Market Fund, we may advertise a standardized current
yield based on income generated by an investment in a particular Fund over a
30-day period. We state the 30-day period in the advertisement. We determine
income earned on debt obligations by applying a calculated yield-to-maturity
percentage to the obligations held during the period. We determine income earned
from stocks by using the stated annual dividend rate applied over the
performance period. Then, we annualize the income earned. We assume that the
amount of income generated during the 30-day period is generated and reinvested
monthly to provide a six-month return which we then annualize. We show the
return as a percentage of the maximum offering price per share on the last day
of the period.
THE AAL MUNICIPAL BOND FUND--STANDARDIZED TAX EQUIVALENT YIELD
For The AAL Municipal Bond Fund, we may advertise a standardized tax equivalent
yield, which illustrates the yield that would be required on a fully taxable
investment to result in the same net income to an investor in the Fund, after
payment of federal taxes at the stated rate. We compute the yield by dividing
the portion of the Fund's current yield that is tax-exempt by one minus a stated
federal income tax rate, and then adding the quotient to the value of any yield
of the Fund that is not tax exempt.
THE AAL SMALL CAP STOCK, MID CAP STOCK, INTERNATIONAL, CAPITAL GROWTH, EQUITY
INCOME, BALANCED, HIGH YIELD BOND, MUNICIPAL BOND AND BOND FUNDS--STANDARDIZED
AVERAGE ANNUAL TOTAL RATE OF RETURN
We may advertise for each of The AAL Mutual Funds (except The AAL Money Market
Fund) a standardized average annual total rate of return for one, five and
ten-year periods, or so much thereof as a Fund has been in existence (since
inception). The standardized average annual total rate of return is the change
in redemption value of shares purchased with an assumed initial investment of
$1,000, after giving effect to the maximum applicable sales charge for Class A
shares or the applicable contingent deferred sales charge for Class B shares,
assuming the reinvestment of dividends and capital gains distributions.
OTHER TOTAL RETURNS
If we believe it would be useful in evaluating performance, we may advertise
total returns for a Fund in another way than the Standardized Average Annual
Total Rate of Return or the other measures of return described above. For
example, except The AAL Money Market Fund, we may advertise total returns
calculated on the basis of the net amount invested in a Fund (the dollars
invested without giving effect to the maximum applicable sales charge). Return
calculations based on the net amount invested will be higher than those
calculated by the standardized methods for the same time period.
We have provided more information on yield and performance in the Statement of
Additional Information.
TRANSFER AGENT, CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Transfer Agent
FIRSTAR TRUST COMPANY
P. O. BOX 2981
615 E. MICHIGAN ST.
MILWAUKEE, WI 53201-2981
Custodian (except for The AAL International Fund)
FIRSTAR TRUST COMPANY
P. O. BOX 2981
615 E. MICHIGAN ST.
MILWAUKEE, WI 53201-2981
Custodian for The AAL International Fund
THE CHASE MANHATTAN BANK, N. A.
CHASE METRO TECH CENTER
BROOKLYN, NY 11245
Independent Accountants
PRICE WATERHOUSE LLP
100 E. WISCONSIN AVE., SUITE 1500
MILWAUKEE, WI 53202
ORGANIZATION AND DESCRIPTION OF SHARES
The AAL Mutual Funds or "Trust" is a diversified open-end management investment
company registered under the Investment Company Act of 1940. Each of the Funds
is a separate series of a Massachusetts Business Trust organized under a
Declaration of Trust dated March 13, 1987. The Declaration of Trust provides
that each shareholder shall be deemed to have agreed to be bound by its terms.
The Declaration of Trust may be amended by a vote of shareholders or the Board
of Trustees. The Trust may issue an unlimited number of shares in one or more
series as the Board of Trustees may authorize. Currently, the Board has
authorized twelve series. This prospectus describes Class A and Class B shares
for ten series of the Trust. Institutional shares for these same series are
described in a separate prospectus.
Each Fund's classes of shares represent interests in the assets of the Fund and
have identical dividend, liquidation and other rights. The separate share
classes have the same terms and conditions, except each Class A and Class B
share bears its separate distribution and shareholder servicing expenses. At the
Trustees' discretion, each class may pay a different share of other expenses,
not including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if each class incurs the expenses in different
amounts, or if a class receives services of a different kind or to a different
degree than the other class. The Funds allocate all other expenses to each class
on the basis of the net asset value of that class in relation to the net asset
value of the particular Fund. Class A and B shares (and Institutional shares)
have identical voting rights except that each class has exclusive voting rights
on any matter submitted to shareholders relating solely to the class. In
addition, Class A and Class B shares (and Institutional shares) have separate
voting rights on any matter submitted to shareholders where the interests of one
class differ from the interests of the other class. Class A and Class B shares
have exclusive voting rights on matters involving the 12b-1 Distribution Plan as
applied to that class. Matters submitted to shareholder vote must be approved by
each Fund separately except:
1) when required otherwise by the 1940 Act; or
2) when the Trustees determine that the matter does not affect all Funds:
then, only the shareholders of the affected Funds may vote.
Shares are freely transferable, entitled to dividends declared by the Trustees,
and receive the assets of their respective Fund in the event of liquidation. The
Trust generally holds annual shareholder meetings only when required by law or
at the written request of shareholders owning at least 10% of the Trust's
outstanding shares. Shareholders may remove Trustees from office by votes cast
in person or by proxy at a shareholders meeting.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder, Trustee and/or officer
liability for acts on behalf of the Trust or for Trust obligations that are
binding only on the assets and property of the Trust. The Funds include this
disclaimer in each agreement, obligation, or contract entered into or executed
by the Trust or the Board. The Declaration of Trust provides for indemnification
out of the Trust's assets for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is remote because
it is limited to circumstances where the Trust itself is unable to meets its
obligations.
ASSET ALLOCATION (DIVERSITICATION)
You should not consider an investment in any one Fund a complete investment
program. Like most investors, you should hold a number of different investments,
each with a different level of risk, such as common stocks, bonds and money
market certificates. You may want to meet your goal of diversifying your
investments by purchasing shares in a number of different Funds, each of which
has a different investment strategy and level of risk.
QUESTIONS
If you have questions, contact your AAL Capital Management Corporation
Registered Representative or the Mutual Fund Service Center by calling 800-553-
6319 or writing us at: The AAL Mutual Funds, 222 West College Avenue, Appleton,
WI 54919-0007.
Glossary of Important Terms
AMERICAN DEPOSITORY RECEIPTS (ADRs): Depository receipts are receipts evidencing
ownership in the underlying shares of a foreign company. Generally, U.S. banks
and trusts issue American depository receipts ("ADRs") and American depository
shares ("ADSs"). They hold the foreign company securities underlying the
receipts in their vaults. In addition to the underlying securities, the receipts
entitle the shareholder to all dividends and capital gains. The bank or trust
company issuing the receipts may have denominated the receipts in a currency
other than the currency underlying the foreign security. U.S. and European banks
and trust companies usually issue global depository receipts (("GDRs"), which
are receipts in the shares of a global offering of a foreign issuer who has
issued two securities simultaneously in two markets, usually publicly in
non-U.S. markets and privately in the U.S. market. European banks and trust
companies generally issue European depository receipts (("EDRs"), sometimes
called continental depository receipts (("CDRs") when issued in bearer form,
which evidence ownership in foreign securities.
AMORTIZED: Paying the principal on a debt by installments; an accounting method
that provides for the gradual decline in the value of an asset.
ANNUALIZED: Calculated to represent a year; a statement produced by calculating
financial results for periods other than a complete year.
ASSET-BACKED SECURITIES: See Mortgage and Asset-Backed Securities, below.
BOND: In general, a bond is an interest-bearing debt security, or discounted
government or corporate security, that usually requires the issuer to pay a
specified amount of interest for a specified time, usually a number of years,
then repay the bondholder the face amount of the bond at maturity.
BUSINESS DAY: Any day both the Federal Reserve Bank of New York and the NYSE are
open for business. A business day normally begins at 8:00 a.m. Central Time when
the NYSE opens, and usually ends at 3:00 p.m. Central Time when the NYSE closes.
CALL OPTION: A contract giving the owner the right to buy 100 shares of a stock
at a predetermined price any time up to a predetermined expiration date.
CAPITAL GAIN OR LOSS: A capital gain or loss equals the increase or decrease in
the value of a security over the original purchase price. A gain or loss is
REALIZED when the security that has increased or decreased in value is sold. An
UNREALIZED GAIN or LOSS occurs when the value of a security increases or
decreases but the security is not sold. If a security is held for more than the
applicable capital gains tax holding period and then sold at a profit, that
profit is a
REALIZED LONG-TERM OR MEDIUM-TERM CAPITAL GAIN. If it is sold at a profit before
the applicable period, that profit is a REALIZED SHORT-TERM CAPITAL GAIN.
CHARTERED FINANCIAL ANALYST (CFA): Designation earned by financial analysts who
pass examinations in economics, financial accounting, portfolio management,
security analysis and standards of conduct.
COLLATERAL: Something of value -- such as real estate, stocks and bonds --
pledged to secure a debt.
COMMERCIAL PAPER: Short-term, unsecured debt obligations issued by businesses
and sold at a discount but redeemed at pay within 2 to 270 days.
COMPOUND INTEREST: Interest paid upon interest; interest that is calculated and
credited daily, weekly, monthly, quarterly, semi-annually or annually on both
the principal and the already credited interest.
CONVERTIBLE BONDS: Bonds that convert or exchange into stocks or carry with it
the right to acquire stocks evidenced by warrants attached to the bond or
acquired as part of the unit with the bonds.
COVERED OPTION: Option contract where the purchase or seller of the contract
owns or has the rights to purchase the shares underlying the option.
CREDIT RISK: The fundamental risk of investing that the issuer of a security may
not be able to meet its obligations to its investors, usually used in describing
the fundamental risk of debt securities. NRSROs rate debt securities on the
ability of the issuer to pay the interest and principal on the debt issued.
DEBT SECURITIES: Bonds and other debt instruments used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity.
DEFERRED INTEREST BONDS: Bonds that an issuer issues at a significant discount
from face value and does not begin paying interest on the bonds for a delayed
period of time. The discount approximates the total amount of interest the bonds
will accrue and compound over the period until the first interest accrual date
at a rate of interest reflecting the market rate of the security at the time of
issuance.
DELAYED DELIVERY SECURITIES: Refers to the delivery of securities later than the
scheduled date. A contract calling for delayed delivery, known as "seller's
option," is usually agreed to by both parties to a trade.
DEPOSITORY RECEIPTS: See American Depository Receipts.
EDUCATION IRA: Allows for contributions up to $500 per year to an Education IRA
for each beneficiary under age 18. Contributions are not tax deductible and the
funds must be distributed (or rolled over to an Education IRA for the benefit of
another family member) by the time the beneficiary reaches age 30. Distributions
are tax free if used for qualified higher education expenses for the beneficiary
it is established for or a family member who receives a roll over distribution
into their Education IRA. Education IRAs became available January 1, 1998.
EQUITY: Ownership interest in a company; stocks represents the equity or amount
of ownership you have in the company issuing the stocks.
FACE VALUE: See Par.
FDIC: The Federal Deposit Insurance Corporation is an agency of the federal
government that guarantees individual deposits up to $100,000 at participating
banks and savings and loan associations.
FINANCIAL RISK: The fundamental risk of how a company will perform after
analyzing its balance sheet and income statements to forecast its future stock
price movements. Fundamental analysts consider past records of assets, earnings,
sales, product, management and markets in predicting future trends in these
indicators of a company's success or failure. There is a risk that factors
affecting a company's performance will change, causing the company's stock to
under-perform.
FLOATING RATE BONDS: See Variable or Floating Rate Bonds.
403(b)(7) RETIREMENT PLAN: A personal retirement savings program that lets
employees of certain tax-exempt organizations or school systems and educational
institutions contribute a portion of their earnings, usually by salary deferral
agreement, into a special mutual fund account. Contributions are made on a
pre-tax basis and benefit from tax-deferred build up of income. The right to
withdraw funds is limited by law and amounts withdrawn are subject to income
taxes.
FUTURES CONTRACT: Agreement to buy or sell a specific amount of a commodity or
financial instrument at a particular price on a stipulated future date.
GENERAL OBLIGATION BONDS: Municipal bonds secured by the issuer's pledge of its
credit and taxing power for the payment of principal and interest.
INDIVIDUAL RETIREMENT ACCOUNT (IRA): A personal retirement savings program that
lets individuals with earned income (and their spouses) under age 70 1/2
contribute both deductible and non-deductible contributions to the account with
the benefit of tax-deferred build up of income. When investors withdraw funds
from their IRA accounts they are subject to income taxes, and if they withdraw
funds before age 59 1/2 they may be subject to penalties.
INDUSTRIAL DEVELOPMENT BONDS: Municipal bonds (usually revenue bonds), the
credit quality of which is normally directly related to the credit standing of
the industrial user involved or of the issuer of any credit enhancement such as
an insurance policy or letter of credit.
INFLATION RISK: The risk that a rise in the level of prices for goods and
services (inflation) will decrease the value of your money in terms of your
investments or the income from your investments.
INTEREST: The payment borrowers (i.e., bond issuers) make to lenders (i.e., bond
holders) for the use of their money, usually expressed as a percentage of the
amount borrowed (the principal). Usually interest is expressed as a rate per
period of time, typically one year, in which case it is called an annual rate of
interest.
INTEREST RATE RISK: The risk that a rise in the level of interest rates will
reduce the market value (price) of securities held, particularly bonds, in a
Fund's portfolio. Typically, a bond pays a fixed rate of interest (called the
"coupon"). When interest rates rise in the economy the value of the coupon (the
amount of money received on the bond periodically) falls in comparison. As a
result, the price of the bond declines. In general, a decline in prevailing
interest rate levels increases the value of the securities, particularly the
bonds, held in a Fund's portfolio and vice versa. Interest rate fluctuations
affect a Fund's net asset values but not the income received from its existing
portfolio because the income paid on the bonds or other securities does not
change. However, changes in prevailing interest rates will affect the yields on
subsequently purchased securities.
INVESTMENT GRADE: A bond or other fixed-income security is considered investment
grade if it is rated investment grade by a NRSRO, such as BBB or better by D&P
or S&P or Baa or better by Moody's. See the Appendix.
LIQUIDITY: The ease and speed at which an investor or holder of the security can
sell or otherwise convert the security into cash.
MARGIN: Amount a customer deposits with a broker when borrowing from the broker
to buy securities.
MARKET CAPITALIZATION: The value of a corporation as determined by multiplying
the current market price of a share of common stock by the number of shares held
by shareholders. Thus, if a corporation has one million shares outstanding and
the market price of a share is $10, the market capitalization of the corporation
is $10 million.
MARKET RISK: Refers to the tendency of security prices to move together. The
risk that a broad market downturn will affect investments in a particular field.
MARKET VALUE: The price at which an investor can buy or sell a security at a
given time in an open market.
MATURITY: The date on which the principal of a debt obligation, such as a bond,
comes due and must be repaid.
MONEY MARKET INSTRUMENT: Short-term, liquid debt, such as Treasury bills and
commercial paper. The issuers sell these instruments at a discount but redeem
them at par. See Commercial Paper.
MORTGAGE AND ASSET-BACKED SECURITIES: Typically these securities consist of
interest in pools of mortgages or consumer loans that provide monthly payments
consisting of both interest and principal payments. In effect, these securities
"pass through" the monthly payments that individual borrowers make on their
mortgages or consumer loans net of any fees paid to the issuers or guarantors of
such securities. Mortgage backed and/or asset-backed securities may make
additional payments due to principal prepayments made on the mortgages or loans,
refinancing or foreclosures on the underlying property. Mortgage-backed
securities also may include debt obligations collateralized by mortgage loans or
mortgage pass-through securities (("CMOs") and stripped mortgage-backed
securities, as well as other types of mortgage-backed securities. For more
information on mortgage-backed securities, please refer to the Statement of
Additional Information.
MUNICIPAL BONDS: Debt obligations issued by or on behalf of state governments,
U.S. territories or possessions, the District of Columbia and their political
subdivisions, agencies and instrumentalities. Generally, the interest on
municipal bonds is exempt from federal income tax.
MUTUAL FUND: Also called an open-end investment company. People invest by buying
shares in the mutual fund, thereby pooling shareholders' money and allowing the
fund to invest in a number of securities. The fund distributes any profits from
these investments, after expenses, to the fund's shareholders. Although shares
in the fund are sold publicly, they are not traded on an open exchange because
the fund will buy and sell shares to meet investor demand. Since the company can
issue more shares, the company's capitalization is not fixed but open.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO): A company that
assesses the quality and potential performance of bonds, commercial paper,
preferred and common stocks and municipal short-term issues, and rates the
probability that the issuer of the debt will meet the scheduled interest
payments and repay the principal. Ratings are published by such companies as
Moody's Investors Service, Standard & Poor's Corporation, Duff & Phelps, Inc.
and Fitch Investor Services, Inc.
PAR: The stated principal value of a bond or the stated value per share of
stock. The par value of stock usually is only used to calculate fees for
incorporation. Typically bonds have a principal value of $1,000.00. A security
selling at its face value is said to be selling at "par". A security selling
below its face value is said to be selling below par or at a discount. A
security selling above its face value is said to be selling above par or at a
premium.
PRINCIPAL: Face value of an obligation (such as a bond or loan) that must be
repaid at maturity.
PORTFOLIO: Combined holding of more than one stock, bond, commodity, real estate
investment, cash equivalent or other asset by an individual or institutional
investor. The purpose of a portfolio is to reduce risk by diversification.
PREFERRED STOCKS: Stocks with a fixed dividend that must be paid before the
dividends of common stocks are paid.
PUBLIC UTILITIES: A privately owned company that is involved in the generation,
transmission or distribution of electricity, gas, energy, water and telephone,
telegraph, satellite, microwave and other communication facilities for the
public benefit.
PUT OPTION: A contract giving the owner the right to sell 100 shares of stock at
a predetermined price any time up to a predetermined expiration date.
QUALIFIED RETIREMENT PLANS: Retirement plans established and maintained by an
employer for the benefit of its employees that must comply with special federal
tax and labor laws and regulations. Some of the more common types of qualified
plans are pension, profit sharing and 401(k) plans. A 401(k) plan also permits
employees to make contributions to the plan through salary deferrals.
RECORD DATE: Date on which a shareholder must officially own shares in order to
be entitled to a dividend.
REGULATED INVESTMENT COMPANY: Term used by Internal Revenue Code to define a
mutual fund.
REPURCHASE AGREEMENT: Agreement between a seller and a buyer, usually of U.S.
government securities, whereby the seller agrees to repurchase the securities at
an agreed upon price and, usually, at a stated time.
REVENUE BONDS: Municipal bonds that usually are payable only from the revenues
derived from a particular facility or class of facilities, or in some cases from
the proceeds of a special excise tax or other specific revenue source.
RISK: The possibility that you may lose all or part of your investment, that the
value of your investment will decrease, or that you will receive little or no
return on your investment. There are many kinds of risks in investing. See
Credit Risk, Inflation Risk and Market Risk.
ROLLOVER IRA: An IRA that receives its funding through a distribution from
another retirement plan, often because of the employee's termination of
employment from the retirement plan's sponsoring employer.
ROTH IRA: A personal retirement savings program that lets individuals make
annual non-deductible contributions of the lessor of $2,000 or earned income to
the account with the benefit of tax-deferred build up of income. When investors
make qualified withdrawals from their Roth IRA accounts they are not subject to
income taxes, and if they withdraw funds before age 59 1/2 they may be subject
to penalties. Roth IRAs became available to investors January 1, 1998.
SARSEP-IRA: A retirement plan that permits the employees to make contributions
through salary reduction agreements. See SEP-IRA.
SEC: The U.S. Securities and Exchange Commission.
SEP-IRA: A Simplified Employee Pension Plan ("SEPO) is a form of
employer-sponsored retirement plan that permits employers to make tax-deductible
contributions directly into IRAs established for their employees. If the
employer permits the employees to make contributions through salary reduction
agreements, it is often called a Salary Reduction Simplified Employee Pension
Plan ("SARSEP-IRA"). No new plans may start after 1996, but existing plans may
continue.
SECURITIES: Financial instruments, usually stocks, bonds, money market
instruments or mutual fund shares issued by corporations, municipalities and
state, local or national governments or investment companies to raise or borrow
money or give the public an opportunity to participate in the growth of a
company.
SIMPLE-IRA: A Savings Incentive Match Plan for Employees ("SIMPLE") is an
IRA-based retirement plan that permits employees to defer part of their salary
(up to $6,000) on a pre-tax basis and to which the employer is required to make
certain matching or non-elective contributions. The IRS may impose a 25% penalty
for distributions made within the first two years.
STANDARD & POOR'S INDEX: Also known as the STANDARD & POOR'S 500 ("S&P 500(R)");
Standard & Poor's Corporation ("S&P")is a subsidiary of McGraw-Hill, Inc. which
provides a number of investor services. The S&P 500(R) is a measure of the
changes in stock market conditions based on the average performance of 500
widely held common stocks. The S&P 500(R) is considered the benchmark for large
stock investors.
S&P SMALL CAP 600 INDEX ("S&P SMALLCAP"): Introduced in October 1994 to track
small-cap stocks. It contains companies chosen by a committee at S&P for their
small-cap size, industry characteristics and liquidity. None of the companies in
the S&P SmallCap overlap the S&P 500(R) or the S&P MidCap. However, some of the
companies in the S&P SmallCap are larger than the S&P MidCap or the S&P 500(R).
This is a function of the normal drift that takes place in any index as some
companies' stock prices appreciate and those of others depreciate.
S&P MID CAP 400 INDEX ("S&P MidCap"): Contains companies chosen by a committee
at S&P for their mid-cap size and industry characteristics. None of the
companies in the S&P MidCap overlap the S&P 500(R) or the S&P SmallCap. Some
companies in the S&P MidCap, however, are larger than those in the S&P 500(R)
and smaller than those in the S&P SmallCap. This is a function of the normal
drift that takes place in any index as some companies' stock prices appreciate
and those of others depreciate.
STOCKS: See Equity.
STRUCTURED SECURITIES: Securities that have a value (i.e., principal amount at
maturity and/or coupons or dividend amounts) linked to currencies, interest
rates, commodities, indices or other financial indicators. Typically, these
securities are debt securities or deposits whose value at maturity (i.e.,
principal value) or coupon rate is determined by reference to a specific
instrument or statistic. For example, gold structured securities may provide for
maturity values that depend on the price of gold, resulting in securities whose
prices tend to rise and fall together with gold prices. These securities involve
additional risk, including structures that may reduce the coupons and/or
dividend amounts to zero or the redemption amounts payable at maturity as a
result of a decline in the value of the underlying instrument. Structured
securities may have more volatility than the price of the underlying instrument.
TOTAL RETURN: The combination of the price change of an investment plus any
income (or other distributions), expressed as a percentage gain or loss in the
investment's value.
TRANSFER AGENT: An agent appointed by a mutual fund to maintain shareholder
records and issue share certificates.
TRUST: An arrangement that permits one party, the Trustee, to hold legal title
of and control property for the benefit of another party, the beneficiary.
TURNOVER: Also called the Portfolio Turnover Rate; the percentage change in the
assets held by a mutual fund due to its purchases and sales. A portfolio
turnover rate of 100% means that the Fund has purchased and sold securities
equal to 100% of the Fund's total net asset value for the year.
12B-1 DISTRIBUTION FEE: The fee a mutual fund charges shareholders to cover the
expenses the fund has for shareholder service, advertising, promoting and
selling shares in the fund, also called distribution fee.
VARIABLE OR FLOATING RATE BONDS: Variable or floating rate debt obligations bear
variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers or certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. The interest rate formulas are designed to result in a market
value for the instruments that approximate their par values, reducing the effect
of changing market conditions on their underlying market values.
VARIABLE RATE MASTER DEMAND NOTES: Unsecured obligations, redeemable on notice,
that permit investment of varying amounts at varying interest rates according to
an agreement with the issuer.
VOLATILITY: The measure of the rise and fall of a security's price over a stated
period of time.
WHEN-ISSUED SECURITIES: The term refers to a transaction made conditionally
because the security, although authorized, has not yet been issued. New issues
of stocks and bonds, stocks that have split and Treasury securities are all
traded on a when issued basis.
YIELD: The income generated by an investment (from dividends or interest) over a
given period of time, expressed as a percentage of either cost or current price.
ZERO COUPON BONDS: Bonds that the issuer issues at a significant discount from
face value. The discount approximates the total amount of interest the bonds
will accrue and compound over the period until maturity reflecting the market
rate of the security at the time of issuance.
Appendix: Security Ratings
RATINGS IN GENERAL
A nationally recognized statistical rating organization's ("NRSRO") rating
represents the organization's opinion on the credit quality a particular
security. The ratings are general and do not portray absolute standards on the
creditworthiness of an issuer. We continuously monitor the ratings given by the
NRSROs on the securities in the Funds' portfolios as part of our ongoing effort
to monitor the Funds' debt quality. Individual analysts give different
weightings to the various factors involved in credit analysis. A rating is not a
recommendation to purchase, sell or hold a security. A rating does not take into
account market value or suitability for a particular investor. When a security
has received a rating from more than one service, the Fund's Adviser and/or the
Sub-Adviser for The AAL International Fund evaluates each rating independently.
Rating organizations base their ratings on current information furnished by the
issuer or obtained from other sources they consider reliable. Rating
organizations may change, suspend or withdraw their ratings due to changes in,
unavailability of, such information or for other reasons.
The Funds have provided the following rating characteristics used by two major
NRSROs, , Moody's Investors Service, Inc. ("Moody's")and Standard & Poor's
Corporation ("S&P").
BOND RATINGS
MOODY'S RATING SCALE DEFINITIONS
AAA: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and Principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise What are general known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as Aaa securities or fluctuations of protective elements may
be of greater amplitude or there may be other Elements present that make
long-term risk appear somewhat larger than the Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade Obligations. Factors giving security to
Principal and interest are considered adequate but elements may be present that
suggest susceptibility to impairment some time in the future.
BAA: Bonds that are rated Baa are considered medium-grade obligations (i.e. they
are neither highly protected nor poorly Secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be Lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment Characteristics and in
fact have speculative characteristics as well.
BA: Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over a long period of time may be small.
CAA: Bonds that are rated Caa have poor standing. Such issues may be in default
or present elements of danger with respect to principal or interest.
CA: Bonds that are rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C: Bonds that are rate C are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P RATING SCALE DEFINITIONS
AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated "AA" has very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degrees.
A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated "BBB" has an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher-rated categories.
BB, B, CC, C , C: Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The "BBB" rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.
B: Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions likely will impair capacity or willingness to
pay interest and repay principal. The "B" rating is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC: Debt rated "CCC" has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC: The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C: The rating "C" is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation in which a bankruptcy petition has been filed, but debt
service payments are continued.
CI: The rating "CI" is reserved for income bonds on which no interest is paid .
D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
the particular type of obligation as a matter of policy.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
category.
COMMERCIAL PAPER RATINGS
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability to repay punctually
promissory obligations. Moody's employs the following three category
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
PRIME 1: Highest quality;
PRIME 2: Higher quality; and
PRIME 3: High quality.
S&P'S COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment. Ratings are graded into four categories, ranging from "A" for
the highest quality obligations to "D" for the lowest.
A: Issues assigned the highest rating category, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety.
A-1: The designation A-1 indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. A "+" designation is applied to
those issues rated "A-1" that possess extremely strong safety characteristics.
A-2: Capacity for timely payment on issues with the designation "A-2" is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3: Issues carrying the designation A-3 have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effect of
changes in circumstances than obligations carrying the higher designations.
OTHER RATINGS
MOODY'S MUNICIPAL NOTE RATINGS
MIG 1: This designation category denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2: This designation category denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3: This designation category denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
MOODY'S RATINGS OF THE DEMAND FEATURES ON VARIABLE RATE DEMAND SECURITIES
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2: This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3: This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
S&P NOTE RATINGS
SP-1: Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2: Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment: (1) the amortization schedule (the
larger the final maturity relative to other maturities, the more likely the
issue will be rated as a note); (2) and the source of payment (the more
dependent the issue is on the market for its refinancing, the more likely it
will be rated as a note).
S&P RATINGS OF THE DEMAND FEATURES ON VARIABLE RATE DEMAND SECURITIES
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity and the commercial paper rating symbols are
usually used to denote the put (demand) options (i.e., AAA/A-1+). Normally
demand notes receive note rating symbols combined with commercial paper symbols
(i.e., SP-1+/A-1+).
<PAGE>
The AAL Mutual Funds
222 West College Avenue
Appleton, WI 54919-0007
Telephone (920) 734-7633, 800-553-5319
TDD 800-684-3416
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
Dated July 1, 1998
Equity-Oriented Funds
The AAL Small Cap Stock Fund:
Investing In Small Company Stocks
The AAL Mid Cap Stock Fund:
Investing In Mid-Sized Company Stocks
The AAL International Fund:
Investing In Foreign Stocks
The AAL Capital Growth Fund:
Investing In Large Company Stocks
The AAL Equity Income Fund:
Investing in Income-Producing Equity Securities
The AAL Balanced Fund
Investing in Common Stocks, Bonds and Money Market Instruments
Income-Oriented Funds
The AAL High Yield Bond Fund:
Investing in Below Investment Grade Bonds
The AAL Municipal Bond Fund:
Investing In Investment Grade Municipal Securities
The AAL Bond Fund:
Investing In Investment Grade Bonds
The AAL Money Market Fund:
Investing in Money Market Instruments
This statement of additional information is not a prospectus. It provides
additional information on the securities offered in the prospectus. You should
read the statement of additional information in conjunction with The AAL Mutual
Funds prospectus, Class A and Class B shares, dated July 1, 1998, and any
supplements thereto. You may obtain a prospectus at no charge by writing or
telephoning your AAL Capital Management Corporation ("AAL CMC") Registered
Representative or The AAL Mutual Funds ("Funds" or "Trust") at the address and
telephone number above. We have described the Funds' Institutional shares in a
separate prospectus and statement of additional information. We also have
described The AAL U.S. Government Zero Coupon Target Fund, Series 2001, and The
AAL U.S. Government Zero Coupon Target Fund, Series 2006, in a separate
prospectus and statement of additional information.
Reading this Statement of Additional Information
As in the prospectus, references to "you" and "your" in the prospectus refer to
prospective investors or shareholders. References to "we," "us" or "our" refer
to the Trust or the Funds and Fund management (the adviser and/or sub-adviser
for The AAL International Fund, distributor, administrator, transfer agent and
custodians) generally. We placed a glossary defining important terms at the end
of the prospectus. If you are unsure of the meaning of any term in the statement
of additional information, please check the glossary in the prospectus. We also
have an appendix to the prospectus that describes nationally recognized
statistical rating organizations ("NRSROs") and their ratings for bonds and
other debt and money market instruments. If you are unsure of a rating, please
refer to the Appendix in the prospectus. Terms not otherwise defined in the
statement of additional information have the same meaning as in the prospectus.
Table of Contents
Investment Objectives and Policies.................................... --
Investment Techniques.................................................. --
Investment Restrictions................................................ --
Purchases, Redemptions; Pricing Considerations...........................--
Compensation of the Board of Trustees....................................--
Investment Advisory Services............................................ --
Distributor............................................................. --
Distribution Plan....................................................... --
Portfolio Transactions.................................................. --
Dividends, Distributions and Taxes...................................... --
Calculation of Yield and Total Return................................... --
General................................................................. --
Shareholder Maintenance Agreement ...................................... --
Independent Accountants................................................. --
Financial Statements.................................................... --
Investment Objectives and Policies
The following information supplements our discussion of the Funds' investment
objectives and policies described in the prospectus. In pursuing the Funds'
objectives, we invest as described below and employ the investment techniques
described in the prospectus and elsewhere in this Statement of Additional
Information. Except for The AAL Balanced and High Yield Bond Funds, each Fund's
investment objective is a fundamental policy. As such, only a vote of a
"majority of outstanding voting securities" can change a Fund's investment
objective. A majority means the approval of the lesser of: (1) 67% or more of
the voting securities at a meeting if the holders of more than 50% of the
outstanding voting securities of a Fund are present or represented by proxy; or
(2) more than 50% of the outstanding voting securities of a Fund.
The AAL Small Cap Stock Fund: Investing In Small Company Stocks
This Fund seeks capital growth by investing primarily in a diversified portfolio
of common stocks, and securities convertible into common stocks, of small-sized
companies with a market capitalization of less than $1 billion. The Fund focuses
on companies with a market capitalization of between $30 million and $600
million.
The AAL Mid Cap Stock Fund: Investing In Mid-Sized Company Stocks
This Fund seeks capital growth by investing primarily in a diversified portfolio
of common stocks, and securities convertible into common stocks, of mid-sized
companies with a market capitalization of between $100 million and $5 billion.
The Fund focuses on companies with a market capitalization of between $400
million and $3.5 billion.
The AAL International Fund: Investing In Foreign Stocks
This Fund seeks capital growth by investing primarily in a diversified portfolio
of foreign stocks.
The AAL Capital Growth Fund: Investing In Large Company Stocks
This Fund seeks long-term capital growth by investing in a diversified portfolio
of common stocks and securities convertible into common stocks.
The AAL Equity Income Fund: Investing In Income-Producing Equity Securities
This Fund seeks current income, long-term income growth and capital growth by
investing primarily in a diversified portfolio of income-producing equity
securities.
The AAL Balanced Fund: Investing in Common Stocks, Bonds and Money Market
Instruments
This Fund seeks long-term total return through a balance between income and the
potential for long-term capital growth by investing primarily in a diversified
portfolio of common stocks, bonds and money market instruments. We will select
these investments consistent with the investment policies of The AAL Capital
Growth, Bond and Money Market Funds, respectively.
The AAL High Yield Bond Fund: Investing in Below Investment Grade Bonds
This Fund seeks high current income and secondarily capital growth by investing
primarily in a diversified portfolio of high risk, high yield bonds ( "junk
bonds").
The AAL Municipal Bond Fund: Investing In Investment Grade Municipal Securities
This Fund seeks a high level of current income that is exempt from federal
income taxes, consistent with preservation of capital, by investing primarily in
a diversified portfolio of municipal bonds.
The AAL Bond Fund: Investing In Investment Grade Bonds
This Fund seeks a high level of current income, consistent with preservation of
capital, by investing primarily in a diversified portfolio of investment grade
bonds and other debt securities.
The AAL Money Market Fund: Investing In Money Market Instruments
This Fund seeks a high level of current income consistent with capital
preservation and liquidity by investing in a diversified portfolio of
high-quality, short-term money market instruments.
Investment Techniques
We may use the techniques described in the prospectus and statement of
additional Information in pursuing the Funds' investment objectives.
Lending Portfolio Securities
Subject to the fundamental investment restriction (4) listed under "Investment
Restrictions," page __, we may lend a Fund's portfolio securities to
broker-dealers and financial institutions, such as banks and trust companies. As
the adviser, we will monitor the creditworthiness of any firm with which a Fund
engages in securities lending transactions. We would continuously secure the
loan by collateral in cash or cash equivalents maintained (on a current basis)
in an amount equal to or greater than the market value of the securities loaned.
We would continue to receive the equivalent of the interest or dividends paid by
the issuer to the Fund on the securities loaned. We would also receive any
additional returns, such as a fixed fee or a percentage of the collateral. We
would have the right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. Generally, we would not have
the right to vote the Fund's loaned securities during the existence of the loan.
However, we would call the loan to permit voting if, in our judgment, a material
event requiring a shareholder vote would otherwise occur before the repayment
date.
In the event of the borrower's default or bankruptcy, we could experience both
delays in liquidating the loan collateral or recovering the loaned securities
and losses for a Fund. For example, during the period when we would seek to
enforce the Fund's rights to the loaned securities, the collateral's value could
decline. We might receive subnormal levels of income or no income from the
loaned securities. We also would incur the expense of enforcing the Fund's
rights to the loaned securities.
Repurchase Agreements
We maintain procedures for evaluating and monitoring the creditworthiness of
firms with which we enter into repurchase agreements for the Funds. We may not
invest more than 10% of a Fund's net assets in repurchase agreements maturing in
more than seven days.
When-Issued and Delayed Delivery Securities
We may purchase securities on a when-issued or delayed-delivery basis for a
Fund, as described in the prospectus. We only purchase on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
including when-issued securities with long-term issue dates of a year or more.
However, we may sell such securities before settlement date if we deem it
advisable for investment reasons.
At the time of purchase we identify liquid assets having a value at least as
great as the purchase price. We have the custodian hold these securities
identified throughout the period of the obligation. Purchasing on a when-issued
or delayed basis as we have described may increase the Fund's net asset value
fluctuation or volatility.
Rated Securities
If a NRSRO reduces or eliminates its rating of a Fund security, we do not have
to sell the security. However, we consider such fact in determining whether we
should continue to hold the security for the Fund. For The AAL Money Market
Fund, we sell downgraded commercial paper to the extent required to comply with
Rule 2a-7 under the Investment Company Act of 1940 (the "Act").
At times a NRSRO changes its ratings for debt securities as a result of changes
at the organization or in its rating system. When this happens, we attempt to
use comparable NRSRO ratings in reassessing investments for a Fund in accord
with its investment policies..
High Yield Bond Market -- The AAL International, Equity Income and High Yield
Bond Funds
We may invest in high risk, high yield bonds for The AAL International, Equity
Income and High Yield Bond Funds. We normally invest at least 65% of The AAL
High Yield Bond Fund's total assets in such securities. As stated in the
prospectus, investing in high yield bonds involves market risk. The market for
high yield bonds has existed for many years and has weathered downturns. In
particular during the late 1980s and early 1990s, the high yield market
experienced a significant downturn. Many corporations had dramatically increased
their use of high yield bonds to fund highly leveraged acquisitions and
restructuring. As a result, from 1989 to 1991, the percentage of lower-quality
securities that defaulted rose significantly above previous default levels.
After this period, default rates decreased.
We may invest in lower-rated asset and mortgage-backed securities for The AAL
High Yield Bond Fund. These securities include interests in pools of lower-rated
bonds, consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations ("CMOs") and stripped mortgage-backed
securities (the separate income or principal components). Changes in interest
rates, the market's perception of the issuers and the creditworthiness of the
parties involved may significantly affect the value of these bonds. Some of
these securities may have structures that makes their reaction to interest rates
and other factors difficult to predict, causing high volatility in their market
value. These bonds also carry prepayment risk. During periods of declining
interest rates, prepayment of the loans and mortgages underlying these
securities tend to accelerate. Investors tend to refinance their mortgages (pay
the old mortgage off with a new mortgage at a lower rate) to lower payments.
Accordingly, any prepayment on the existing securities we hold for the Fund
reduces our ability to maintain positions in high-yielding, mortgage-backed
securities and reinvest the principal at comparable yields.
Certain high yield bonds carry particular market risks. Zero coupon, deferred
interest and payment-in-kind ("PIK") bonds issued at deep discounts may
experience greater volatility in market value. Asset and mortgage-backed
securities, including CMOs, in addition to greater volatility, may carry
prepayment risks.
CMOs and Multi-Class Pass-Through Securities -- The AAL Balanced, High Yield
Bond and Bond Funds
We may invest in mortgage-backed securities, including CMOs and multi-class
pass-through securities. CMOs and multi-class pass-through securities are debt
instruments issued by special purpose entities secured by pools of mortgage
loans or other mortgage-backed securities. Multi-class pass-through securities
are interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on the underlying collateral
provide the money to pay debt service on the CMO or make scheduled distributions
on the multi-class pass-through security. Multi-class pass-through securities,
CMOs, and classes thereof (including those discussed below) are examples of the
types of financial instruments commonly referred to as "derivatives."
A CMO contains a series of bonds or certificates issued in multiple classes.
Each CMO class (referred to as "tranche") has a specified coupon rate and stated
maturity or final distribution date. When people start prepaying the principal
on the collateral underlying a CMO (such as mortgages underlying a CMO), some
classes may retire substantially earlier than the stated maturity or final
distribution dates. The issuer structures a CMO to pay or accrue interest on all
classes on a monthly, quarterly or semi-annual basis. The issuer may allocate
the principal and interest on the underlying mortgages among the classes in many
ways. In a common structure, the issuer applies the principal payments on the
underlying mortgages to the classes according to scheduled cash flow priorities.
There are many classes of CMOs. Interest only classes ("IOs") entitle the class
shareholders to receive distributions consisting solely or primarily of all or a
portion of the interest in an underlying pool of mortgages or mortgage-backed
securities ("mortgage assets"). Principal only classes ("POs") entitle the class
shareholders to receive distributions consisting solely or primarily of all or a
portion of the underlying pool of mortgage assets. In addition, there are
"inverse floaters," which have coupon rates that move in the reverse direction
to an applicable index, and accrual (or "Z") bonds (described below).
At any one time, we may not invest more than 7.5% of a Fund's net assets in IOs,
POs, inverse floaters or accrual bonds individually or more than 15% in all such
obligations combined.
Inverse floating CMO classes are typically more volatile than fixed or
adjustable rate CMO classes. We would only invest in inverse floating CMOs to
protect against a reduction in the income earned on investments due to a
predicted decline in interest rates. In the event interest rates increased, we
would lose money on investments in inverse floating CMO classes. An interest
rate increase would cause the coupon rate on an inverse CMO class to decrease,
and, like other mortgage-backed securities, the value would decrease as interest
rates increase.
Cash flow and yields on IO and PO classes are extremely sensitive to principal
payment rates (including prepayments) on the underlying mortgage loans or
mortgage-backed securities. For example, rapid or slow principal payment rates
may adversely affect the yield to maturity of IO or PO bonds, respectively. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the holder of an IO bond may incur substantial losses in value due
to the lost interest stream even if the IO bond has a AAA rating. If the
underlying mortgage assets experience slower than anticipated prepayments of
principal, the PO bond will incur substantial losses in value due to lost
prepayments. Rapid or slow principal payment rates may cause IO and PO bond
holders to incur substantially more losses in market value than if they had
invested in traditional mortgage-backed securities. On the other hand, if
interest rates rise, the value of an IO might increase and partially offset
other bond value declines in a Fund's portfolio. If interest rates fall, the
value of a PO might increase offsetting lower reinvestment rates in a Fund's
portfolio.
An accrual or Z bondholder does not receive cash payments until one or more of
the other classes have received their full payments on the mortgage loans
underlying the CMO. During the period when the Z bondholders do not receive cash
payments, interest accrues on the Z class at a stated rate. The accrued interest
is added to the amount of principal due to the Z class. After the other classes
have received their payments in full, the Z class begins receiving cash payments
until it receives its full amount of principal (including the accrued interest
added to the principal amount) and interest at the stated rate. Generally, the
date when cash payments begin on the Z class depends on the prepayment rate of
the mortgage loans underlying the CMO. A faster prepayment rate results in an
earlier commencement of cash payments on the Z class. Like a zero coupon bond,
during its accrual period the Z class has the advantage of eliminating the risk
of reinvesting interest payments at lower rates during a period of declining
interest rates. Like a zero coupon bond, the market value of a Z class bond
fluctuates more widely with changes in interest rates than would the market
value of bond from a class that pays interest currently. Changing interest rates
influence prepayment rates. As noted above, such changes in prepayment rates
affect the date at which cash payments begin on a Z tranche, which in turn
influences its market value.
Structured Securities -- The AAL International and High Yield Bond Funds
We may invest in structured notes and/or preferred stocks for The AAL
International and High Yield Bond Funds. The issuer of a structured security
links the security's coupon, dividend or redemption amount at maturity to some
sort of financial indicator. Such financial indicators can include currencies,
interest rates, commodities and indices. The coupon, dividend and/or redemption
amount at maturity may increase or decrease depending on the value of the linked
or underlying instrument.
Investments in structured securities involve certain risks. In addition to the
normal credit and interest rate risks inherent with a debt security, the
redemption amount may increase or decrease as a result of price changes in the
underlying instrument. Depending on how the issuer links the coupon and/or
dividend to the underlying instrument, the amount of the dividend may be reduced
to zero. Any further declines in the value of the underlying instrument may then
reduce the redemption amount at maturity. Structured securities may have more
volatility than the price of the underlying instrument.
Variable Rate Demand Notes
We may purchase variable rate, master demand notes for the Funds. The notes are
unsecured instruments that permit the amount of the debt to vary and provide for
periodic adjustments in the interest rate. Variable rate, master demand notes
normally do not trade and do not have a secondary market. However, the note
holder may demand principal payment at any time. Except for The AAL High Yield
Bond Fund, we purchase notes rated only in one of the two highest rating
categories by a NRSRO. We also may purchase notes for a Fund where the issuer
has a received a rating in the top two categories for a class of short term debt
obligations comparable in priority and security with the notes. If an issuer of
a variable rate, master demand note defaults on its payment obligation, we may
not be able to dispose of the note due to the absence of a secondary market. As
a result, we might suffer a loss for a Fund to the extent of the default. We
invest in variable rate master demand notes for a Fund only when we believe it
involves minimal credit risk.
In some instances, we may purchase variable rate securities for The AAL Money
Market Fund with actual maturities greater than or equal to 397 days. Generally,
a money market fund is limited to investments with maturities less than 397
days. Variable rate, money market securities have yields that vary in relation
to changes in specific money market rates, such as the prime rate. To purchase
variable rate money market instruments with maturities greater than 397 days, we
must be able to consider these securities as having maturities of less than 397
days pursuant to Securities and Exchange Commission ("SEC") rules. We only
invest in these longer-term, variable rate securities for the Fund when we can
take advantage of the higher yield paid on them as compared to short-term
securities. We only invest when it appears to us that the variable rates on
these securities may reduce the fluctuations in market value typical of
longer-term securities. We may purchase variable rate securities with a put
option for a Fund. The put option may reduce the risk of fluctuations in market
value, because the put option allows us to sell the security back to the issuer
at a set price.
Portfolio Turnover -- The AAL Small Cap Stock, Mid Cap Stock, High Yield Bond,
Municipal Bond and Bond Funds
As noted in the prospectus, portfolio turnover rates in excess of 100% may
increase brokerage and other trading expenses we incur for a Fund.
For the fiscal year ended April 30, 1998, we had portfolio turnover rates of
105.60% and 104.73% for The AAL Small Cap Stock and Mid Cap Stock Funds. The
rates reflected our growth investment styles for the Funds. We also purchased
stocks in initial public offerings and sold them shortly thereafter. Stock
prices in initial public offerings tend to appreciate or decline significantly
after the offering and then level off in price. The rates also reflect the
volatility of small and mid cap stock prices.
We had portfolio turnover rates for The AAL Municipal Bond and Bond Funds of
139.18% and 483.76%. The rate for The AAL Bond Fund reflects our active
selection of the individual bonds that we believe provide the best income within
the Fund's investment parameters at any one time For The AAL Bond Fund, we may
have a portfolio turnover rate for the next fiscal year in excess of 300%, and
as high as 600% or more. Our turnover rate for The AAL Municipal Bond Fund also
reflects our active selection of the individual bonds that we believe provide
the best income and chance for capital appreciation and, thus, preservation, at
any one time. We try to exploit pricing inefficiencies we believe exist in the
municipal securities market.
We may have portfolio turnover in excess of 100% for The AAL High Yield Bond
Fund, which began operations on January 8, 1997. In seeking its objectives, we
buy or sell portfolio securities whenever the portfolio manager believes it
appropriate. Generally, how long we have owned the security for the Fund does
not influence the portfolio manager's decision on when we will trade the
security. From time to time, we will buy securities intending to seek short-term
trading profits. As a result, The AAL High Yield Bond Fund's portfolio turnover
rate may be higher than that of other mutual funds in this category. The
turnover rate is not a limiting factor when considering a change in the Fund's
portfolio.
Options and Futures
The following sections pertain to options and futures. Except for The AAL Money
Market Fund, we may engage in options, futures and options on futures
transactions for the Funds. We may engage in options and futures transactions
for bona fide hedging or other permissible risk management reasons (including
enhancing returns for a Fund). When entering into these transactions, we follow
the SEC and the Commodities Futures Trading Commission requirements and set
aside liquid assets in a separate account to secure a Fund's potential
obligations under such contracts. We cannot sell securities held in a segregated
account while the futures or options strategy is outstanding, unless we replace
such assets with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of a Fund's assets could impede portfolio
management or our ability to meet redemption requests or other obligations for a
Fund.
We may try to enhance returns or hedge against a decline in the value of a
Fund's securities by writing (selling) and purchasing options and futures
contracts. For example, during a neutral or declining market, we may gain
additional income by writing options and receiving premiums for a Fund. When we
write (sell) covered call options for a Fund, we forgo the opportunity to profit
from increases in the market value of the underlying securities above the sum of
the options' premium and the exercise price. On the other hand, we reduce the
amount of any decline in the value of the underlying securities to the extent of
the premium we receive from writing the call for a Fund. During a rising market,
we may gain incremental income by purchasing call options and futures contracts
for a Fund.
We also may use options and futures to hedge against an anticipated price
increase in a security we plan to buy for a Fund.
If new types of options and futures contracts become available, we may use them
for the Funds. Prior to their use, however, we must obtain a determination from
the Funds' Board of Trustees that their use would be consistent with the Fund's
investment objectives and policies.
Options on Securities and Indexes
An option contract on a security (or index) gives the holder, in return for a
premium, the right to buy from (call) or sell to (put) the option writer of the
underlying security (or cash value of underlying index) at a specified exercise
price at any time during the option term.
Upon exercise of a call option, the writer (seller) has the obligation to
deliver the underlying security to the holder; provided the holder pays the
exercise price. Upon exercise of a put option, the writer has the obligation to
pay the holder the exercise price upon delivery of the underlying security.
Upon the exercise of an index options, the writer must pay the difference
between the cash value of the index and the exercise price multiplied by the
specified multiplier for the index option. (An index is a statistical composite
that measures changes in the economy or financial market, usually reflecting
specified facets of a particular securities market, a specific group of
financial instruments, securities or economic indicators.).
Options and futures exist on debt, equity, indexes and other securities or
instruments. They may take the form of standardized contracts traded on national
securities exchanges, boards of trade or similar entities. They also may trade
in the over-the-counter market. Some debt instruments, such as bonds, trade with
cash put options, which generally allow the holder to sell the security back to
the issuer at a specified price for a specified amount of time.
When we write options, we may only write "covered" calls or puts for a Fund.
A call option for a Fund is covered if we hold the security underlying the call
for the Fund. Also a call option for a Fund is covered if we have an absolute
and immediate right to acquire the security for the Fund without additional cash
consideration upon conversion or exchange of other securities held in the
portfolio. If additional cash consideration is required, we hold cash or cash
equivalents in such an amount in a segregated account with the Fund's custodian.
An index call option is covered if we hold cash or cash equivalents with the
Fund's custodian equal to the contract value. A written call option is covered
if we hold a call option on the same security or index under two conditions. The
first condition is where the exercise price of the call purchased is equal to or
less than the exercise price of the call written. The second conditions is where
the exercise price of the call purchased is greater than the exercise price of
the call written; provided that we maintain the difference with the Fund's
custodian in cash or cash equivalents in a segregated account.
A put option on a security or an index is covered if we maintain cash or cash
equivalents equal to the exercise price in a segregated account with the Fund's
custodian. A put option is covered if we hold a put on the same security or
index as the put written under two conditions. The first condition is where the
exercise price of the put is equal to or greater than the exercise price of the
put written. The second condition is where the exercise price of the put is less
than the exercise price of the put written; provided we maintain cash or cash
equivalents with the Fund's custodian in a segregated account.
Prior to the expiration or exercise of an option, we may close the option out by
entering into an offsetting transaction. We would affect an offsetting
transaction for a Fund by purchasing or selling an option of the same series
(type, exchange, underlying security or index, exercise price and expiration).
Due to market factors, we may not be able to affect a closing purchase or sale
at the time we would like to for a Fund.
We realize a capital gain from a closing purchase transaction if the premium for
purchasing the closing option is less than the premium received from writing the
option. If the premium for purchasing the closing option is more, we realize a
capital loss for the Fund. If the premium received from a closing sale
transaction is more than the premium paid to purchase the option, we realize a
capital gain for the Fund. If the premium is less, we realize a capital loss for
the Fund.
If an option we write for a Fund expires unexercised, we realize a capital gain
equal to the premium received. If an option we purchased for a Fund expires
unexercised, we realize a capital loss equal to the premium we paid for the
option.
The principal factors affecting the market value of a put or call option include
supply and demand, interest rates, the current market price of the underlying
security or index in relation to the exercise price of the option, the
volatility of the underlying security or index and the time remaining until the
expiration date.
We record a premium paid for an option purchased by us for a Fund as an asset.
We record the premium received for an option written by us for a Fund as a
deferred liability. We mark-to-market the value of an option purchased or
written on a daily basis at the closing price on the exchange on which it
traded. If the option was not traded on an exchange or a closing price was not
available, we would value the option at the mean between the last bid and asked
prices.
Risks Associated with Options on Securities and Indexes
Options transactions have risks. A decision as to whether, when and how we use
options involves the exercise of skill and judgment. For example, significant
differences could exist between the market for the underlying security (or
index) and the market for the overlying options. These differences, such as
differences in the way the underlying securities are trading and the way the
options on the securities are trading, could result in an imperfect correlation
between the markets. As a result, we might not be able to achieve our objectives
in an options transaction for the Fund. Market behavior and unexpected events
may hinder our otherwise well-conceived options transactions we have entered
into for a Fund.
We cannot assure you that a liquid market will exist when we seek to close out
an option position for a Fund. If we could not close out an option we had
purchased for a Fund, we would have to exercise the option to realize any profit
or let the option expire worthless. If we could not close out a covered call
option that we had written for a Fund, we could not sell the underlying security
unless the option had expired not exercised.
When we write a covered call option for a Fund, we forgo the opportunity to
profit from increases in the covering security's market value above the sum of
the premium and the call's exercise price.
If the exchange (or Board of Trade) suspends trading in an option we purchased
for a Fund, we cannot enter into a closing transaction during the suspension. If
the exchange imposes restrictions on the option's exercise, we might not be able
to exercise an option we have purchased for a Fund. Except to the extent that a
call option on an index written by a Fund is covered by an option on the same
index purchased by a Fund, movements in the index may result in a loss to a
Fund. Such losses may be mitigated by changes in the value of a Fund's portfolio
securities during the period the option was outstanding.
Futures Contracts and Options on Futures Contracts
In addition to foreign currency futures contracts, which we discuss below, we
may enter into interest rate and index futures contracts. An interest rate or
index futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument or the cash
value of an index at a specified price and time. A futures contract on an index
is an agreement by which two parties agree to take or make delivery of an amount
of cash equal to the difference between the closing value of the index on the
contract's last trading day and the original price entered into for the
contract. Although the index's value may reflect the value of certain underlying
securities, the party responsible for delivery delivers cash (not the underlying
securities).
A public market exists in futures contracts covering a number of indexes as well
as other financial instruments. Such instruments include: U.S. Treasury bonds;
U.S. Treasury notes; GNMA certificates; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. Boards of trade and other issuers may develop and trade other futures
contracts. As with options, if new types of futures contracts become available,
we may use them for the Funds. Prior to their use, however, we must obtain a
determination from the Funds' Board of Trustees that their use would be
consistent with the Fund's investment objectives and policies.
We may purchase and write call and put futures options for a Fund. Our ability
to write call and put futures, however, depends on whether the Commodity Futures
Trading Commission grants certain regulatory relief (such as an exemption from
being considered a commodities pool operator).
Options on futures possess many of the same characteristics as options on
securities and indexes. A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short position (put)
in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true.
As long as regulatory authorities require, we limit our use of futures and
options on futures to hedging transactions. We might use futures contracts to
hedge against anticipated interest rate changes we believe might adversely
affect either the value of a Fund's securities or the price of securities we
intend to purchase for a Fund. Our hedging strategy may include sales of futures
contracts to offset the effect of expected interest rate increases. It also may
include purchases of futures contracts to offset the effect of expected interest
rate declines. Although we could use other techniques to reduce a Fund's
exposure to interest rate fluctuations, we may be able to hedge a Fund's
exposure more effectively and perhaps at a lower cost by using futures and
options on futures.
The success of any hedging technique depends on our ability to correctly predict
changes in the level and direction of interest rates and other factors. Should
our predictions prove incorrect, the Fund's return might be lower than it would
have been had we not tried the hedging strategy. However, in the absence of the
ability to hedge, we might have to take portfolio actions in anticipation of the
same market movements with similar investment results at potentially greater
transaction costs.
We only enter into standardized futures or options on futures contracts that
trade on U.S. exchanges, boards of trade, or similar entities, or are quoted on
an automated quotation system.
When we purchase or sell a futures contract for a Fund, we deposit with the
custodian (or broker, if legally permitted) a specified amount of cash or U.S.
government securities ("initial margin"). The exchange or board of trade on
which the futures contract trades sets the margin requirement. The exchange may
modify the margin requirement during the term of a futures contract. The initial
margin is in the nature of a performance bond or good faith deposit on the
futures contract. The custodian or broker returns the margin to a Fund upon
termination of the contract, assuming we have fulfilled all contractual
obligations for the Fund. We expect to earn interest income on the initial
margin deposit for a Fund. We value a futures contract held for a Fund on a
daily basis at the official settlement price of the exchange on which it trades.
Each day a we pay or receive cash for the Fund, called "variation margin," equal
to the daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or loan by
us for a Fund, but is instead a settlement between a Fund and the broker of the
amount one would owe the other if the futures contract expired. In computing
daily net asset value, we mark-to-market a Fund's open futures positions.
We are required to deposit and maintain margin on any put and call options on
futures contracts that we have written for a Fund. Such margin deposits vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the option's current market and other futures
positions we hold for the Fund.
Some futures contracts call for making or taking delivery of the underlying
securities. Generally we would close out these obligations prior to delivery by
making offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, we realize a capital gain
for the Fund. If the offsetting purchase price is more, we realize a capital
loss for the Fund. Conversely, if an offsetting sale price is more than the
original purchase price, we realize a capital gain for a Fund. If the offsetting
sale price is less, we realize a capital loss for a Fund. We must include the
transaction costs in calculating a gain or loss on the offsetting transactions.
Risks Associated with Futures
There are several risks associated with using futures contracts and options on
futures as hedging techniques. Our purchase or sale of a futures contract may
result in losses in excess of the amount we invested in the futures contract for
a Fund. We cannot guarantee how price movements in the market for the hedging
vehicle and market for the underlying portfolio securities being hedged will
correlate. Significant differences exist between the securities and futures
markets that could result in an imperfect correlation. These differences could
cause a given hedging strategy we have entered into for a Fund to not achieve
its objectives. The degree of imperfect correlation depends on circumstances
such as the variations in the speculative market demand for the futures and/or
futures options contracts used to hedge the underlying portfolio securities. A
decision as to whether, when and how we hedge involves the exercise of skill and
judgment. Our hedges may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.
Futures exchanges may limit the amount of price fluctuation in a contract for
trading in a single day. An exchange establishes a daily limit on the amount a
contract's price may vary either up or down from the previous day's settlement
price. Once the futures contract trades above or below the daily limit, the
exchange stops trading beyond the limit. The daily limit governs price movements
during a particular trading day but does not limit potential losses for the
contract holders. The daily limit may prevent us from being able to liquidate an
unfavorable position for a Fund. For example, futures prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and subjecting some
holders of futures contracts to substantial losses.
We cannot assure a liquid market will exist at a time when we seek to close out
a futures or futures options position for a Fund. If a liquid market did not
exist, we would have to continue meeting margin requirements until we could
close the position. We also cannot assure that an active secondary market will
develop or continue to exist for the futures and futures options discussed
above.
Limitations on Options and Futures
We do not enter into an open futures contract position or purchase an option:
the initial margin deposit plus the premiums paid less the amount by which any
such position is "in the money" exceeds 5% of a Fund's net assets. A call option
is "in the money" if the value of the futures contract that is the subject of
the option exceeds the exercise price. A put option is "in the money" if the
exercise price exceeds the value of the futures contract that is the subject of
the option.
When purchasing a futures contract or writing a put on a futures contract, we
must maintain with the Fund's custodian (or broker, if legally permitted) cash
or cash equivalents (including any margin) equal to the market value of such
contract. When writing a call option on a futures contract, we maintain with the
Fund's custodian cash or cash equivalents (including any margin) equal to the
amount such option is in the money until the option expires or we have entered
into an offsetting transaction closing out the option for the Fund.
We may not maintain open short positions in futures contracts, call options
written on futures contracts or call options written on indexes for a Fund, if,
in the aggregate, the market value of all such open positions exceeds the
current value of the Fund's portfolio. In valuing the portfolio, we have to take
into account unrealized gains and losses on the open positions and adjust for
the historical relative volatility of the relationship between the portfolio and
the positions. To the extent we have written call options on specific securities
in a Fund's portfolio, we deduct the value of those securities from the
portfolio's current market value.
We avoid being deemed a "commodity pool operator" by complying with the
Commodity Futures Trading Commission Rules. As such, we do not invest in a
commodity contract for a Fund where the "underlying commodity value" of each
long position at any time exceeds the sum of:
(1) the value of the Fund's short-term U.S. debt obligations or other U.S.
dollar denominated, high-quality short-term money market instruments
and cash that we have set aside for the Fund in an identifiable
manner, plus any funds deposited as margin on the contract;
(2) unrealized appreciation on the contract held by the broker; and
(3) cash proceeds from existing investments due in not more than 30 days.
"Underlying commodity value" means the size of the contract multiplied by the
daily settlement price of the contract.
Taxation of Options and Futures
If we exercise a call option for a Fund, we add the premium paid for the call
option to the cost of the security purchased. If we exercise a put option, we
deduct the premium paid for the put option from the proceeds of the security
sold. For index options and futures, which are cash settled, the difference
between the cash received at exercise and the premium paid is a capital gain or
loss.
Our entry into closing purchase transactions for a Fund results in a capital
gain or loss. If an option was "in the money" when we wrote it and we held the
security covering the option for more than one year before writing it for a
Fund, any loss realized in a closing purchase transaction would be long-term for
federal tax purposes. The holding period of the securities covering an "in the
money" option does not include the time period the option was outstanding.
When we hold a futures contract for a Fund until delivery, we will realize a
capital gain or loss on the futures contract. The capital gain or loss is equal
to the difference between the price at the time we entered into the futures
contract for the Fund and the settlement price on the earlier of the delivery
notice date or expiration date. If we deliver securities for a Fund under a
futures contract, we realize a capital gain or loss for the Fund on those
securities.
For Federal income tax purposes, we generally recognize a Fund's yearly net
realized gains and losses on its options, futures and options on futures
positions ("year-end mark to market"). Generally, any gain or loss recognized
with respect to such positions (either by year-end mark to market or by actual
closing of the positions) is considered to be 60% long term and 40% short term,
without regard to the holding periods of the contracts. However, in the case of
positions classified as part of a "mixed straddle," we may defer the recognition
of losses on certain positions (including options, futures and options on
futures positions, the related securities and certain successor positions
thereto) to a later taxable year for a Fund. Selling futures contracts or
writing call options (or call options on futures) or buying put options (or put
options on futures) for the purposes of hedging against an anticipated change in
the value of a Fund's securities may affect the securities' holding period.
We distribute any recognized net capital gains for a Fund, including any
recognized net capital gains (including year-end mark-to-market gains) on
options and futures transactions for federal income tax purposes. We combine and
distribute a Fund's capital gains on its options and futures transactions and
its capital gains on other investments. We also advise shareholders on the
nature of these distributions for a Fund.
Federal Tax Treatment of Forward Foreign Exchange Contracts
We may enter into certain forward foreign exchange contracts for a Fund that the
Internal Revenue Service will treat as Section 1256 contracts or straddles under
the Internal Revenue Code.
We must consider these Section 1256 contracts as having been closed at the end
of a Fund's fiscal year and we must recognize any gains or losses on these
contracts for tax purposes at that time. The IRS characterizes such gains or
losses from the normal closing or settlement of such transactions as ordinary
gain or loss. We are required to distribute any net gains on such transactions
to the Fund's shareholders even if we have not actually closed the transaction
and received cash to pay for the distribution.
We may consider forward foreign exchange contracts that offset a foreign dollar
denominated bond or currency position as straddles for tax purposes. Considering
these contracts as straddles allows us to defer a loss on any position in a
straddle to the extent of unrealized gain in an offsetting position.
For a Fund to continue qualifying for federal income tax treatment as a
regulated investment company, it must derive at least 90% of its gross income
from qualifying income (i.e., dividends, interest, income derived from loans of
securities and gains from the sale of securities or currencies). Pending tax
regulations could limit the extent that net gains realized from options, futures
or foreign forward exchange contracts on currencies are qualifying income for
purposes of 90% requirement.
Foreign Securities
The AAL Small Cap Stock, Mid Cap Stock, Capital Growth, Balanced and Bond
Funds
We may invest in foreign securities trading domestically through depository
receipts or on a U.S. national securities exchange or Nasdaq National Market for
The AAL Small Cap Stock, Mid Cap Stock and Capital Growth Funds. We do not
intend to invest more than 10% of their net assets in such foreign securities.
We may invest up to 20% of The AAL Bond Fund's net assets in debt securities of
foreign issuers payable in U.S. dollars. We may invest in foreign securities for
The AAL Balanced Fund to the extent The AAL Capital Growth and Bond Funds allow
investments in foreign securities for the common stock and fixed-income sectors
of the Fund, respectively. Foreign securities may present a greater degree of
risk (including risks relating to tax provisions or expropriation of assets)
than do securities of domestic issuers.
Foreign Securities - The AAL International, Equity Income and High Yield
Bond Funds
We normally invest at least 65% of The AAL International Fund's total assets in
foreign securities primarily trading in at least 3 different countries, not
including the U.S.
We may invest up to 15% of The AAL Equity Income Fund's net assets in foreign
securities. We also may invest in foreign securities trading domestically
through depository receipts and securities of foreign issuers traded on a U.S.
national securities exchange or Nasdaq National Market without regard to the 15%
limitation. For purposes of diversification for a Fund, we consider depository
receipts as investments in the underlying stocks.
We may invest up to 15% of The AAL High Yield Bond Fund's net assets in foreign
bonds. At this time, we intend to limit our foreign bond purchases for the Fund
to those trading in the U.S.
Foreign investing involves risks in addition to the risks inherent in U.S.
investing. Foreign countries tend to disseminate less public information about
their issuers. Many foreign countries do not subject their companies to uniform
accounting, auditing and financial reporting standards. The value of foreign
investments may rise or fall because of changes in currency exchange rates. As a
result, we may incur costs in converting securities denominated in foreign
currencies into U.S. dollars for a Fund. Dividends and interest on foreign
securities may be subject to foreign withholding taxes, which would reduce a
Fund's income without providing a tax credit to shareholders. When necessary, we
may have more difficulty obtaining and enforcing judgments in foreign countries.
We also would incur more expense. Even though we mainly intend to invest in
securities trading in stable and developed countries, we still face the
possibility of expropriation, confiscatory taxation, nationalization, currency
blockage or political or social instability that could affect investments in
such countries.
We may invest in American Depository Receipts ("ADRs") for The AAL International
and Equity Income Funds without limit. ADR facilities may be either "sponsored"
or "un-sponsored." While sponsored and unsponsored ADR facilities are similar,
distinctions exist between the rights and duties of ADR holders and market
practices. Sponsored facilities have the backing or participation of the
underlying foreign issuers. Un-sponsored facilities do not have the
participation by or consent of the issuer of the deposited shares. Un-sponsored
facilities usually request a letter of non-objection from the issuer.
Holders of un-sponsored ADRs generally bear all the costs of such facility. The
costs of the facility can include deposit and withdrawal fees, currency
conversion and other service fees. The depository of an un-sponsored facility
may not have a duty to distribute shareholder communications from the issuer or
to pass through voting rights. Issuers of un-sponsored ADRs do not have an
obligation to disclose material information about the foreign issuers in the
U.S. As a result, the value of the un-sponsored ADR may not correlate with the
value of the underlying security trading abroad or any material information
about the security or the issuer disseminated abroad.
Sponsored facilities enter into an agreement with the issuer that sets out
rights and duties of the issuer, the depository and the ADR holder. The
sponsored agreement also allocates fees among the parties. Most sponsored
agreements provide that the depository will distribute shareholder notices,
voting instructions and other communications. The AAL International and Equity
Income Funds may invest in sponsored and un-sponsored ADRs.
For The AAL International Fund, we also may hold foreign securities in the form
of American Depository Shares ("ADSs"), Global Depository Receipts ("GDRs") and
European Depository Receipts ("EDRs"), or other securities convertible into
foreign securities. These receipts may not be denominated in the same currency
as the underlying securities. Generally, American banks or trust companies issue
ADRs and ADSs, which evidence ownership of underlying foreign securities. GDRs
represent global offerings where an issuer issues two securities simultaneously
in two markets, usually publicly in a non-U.S. market and privately in the U.S.
market. EDRs (sometimes called Continental Depository Receipts ("CDRs")) are
similar to ADRs, but usually issued in Europe. Typically issued by foreign banks
or trust companies, EDRs and CDRs evidence ownership of foreign securities.
Generally, ADRs and ADSs in registered form trade in the U.S. securities
markets, GDRs in the U.S. and European markets, and EDRs and CDRs (in bearer
form) in European markets. For diversification purposes, we consider investments
in ADRs, ADSs, GDRs, EDRs and CDRs as investments in the underlying stocks for
the Fund.
Classification of Foreign Markets -- The AAL International Fund
Investors often classify foreign markets as mature or emerging. The countries in
which we may invest for The AAL International Fund are classified as follows.
Mature: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, United
Kingdom and United States.
Emerging: Argentina, Brazil, Chile, China, Czech Republic, Ecuador, Greece,
Hungary, India, Indonesia, Jamaica, Kenya, Israel, Jordan, Malaysia,
Mexico, Morocco, Nigeria, Pakistan, People's Republic of China, Peru,
Philippines, Poland, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela and Vietnam.
We may invest in securities of additional countries when such investments are
consistent with the Fund's objective and policies.
Foreign Currency Transactions
Foreign Currency Spot Transactions and Forward Contracts
To manage the currency risk accompanying investments in foreign securities and
to facilitate the purchase and sale of foreign securities, we may engage in
foreign currency transactions on a spot (cash) basis for the Funds. We invest at
the spot rate prevailing in the foreign currency exchange market. We also may
enter into contracts to purchase or sell foreign currencies at a future date
("forward foreign currency" contracts or "forward" contracts).
A forward contract involves an obligation to purchase or sell a specific foreign
currency at a future date at a set price. Forward contracts principally trade in
the inter-bank market and are conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement and no commissions are charged at any stage
for trades.
Whenever we intend to purchase or sell a security denominated in a foreign
currency for a Fund, we may want to "lock in" the U.S. dollar price of the
security. We can protect a Fund by entering into a forward contract for the
purchase or sale of a fixed amount of U.S. dollars equal to the amount of
foreign currency involved in the underlying security transaction. With a forward
contract, we can protect the Fund against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency between the date the security is purchased or sold and the date
on which the payment is made or received.
We may use forward contracts for a Fund when we believe that a particular
foreign currency may suffer a substantial decline against the U.S. dollar. In
this situation, we would enter into a forward contract to sell a fixed amount of
the foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. We, however, cannot
precisely match the forward contract amounts and the value of the securities
involved. The securities' values change as a consequence of market movements
between the date we entered into the forward contract for the underlying
currency and the date it matures.
Due to the fact that movement in the short-term currency market is extremely
difficult to predict, successful execution of a short-term hedging strategy is
highly uncertain. Therefore, we do not enter into forward contracts or maintain
a net exposure to such contracts where completion would obligate us to deliver
foreign currency in excess of the value of the Fund's securities or other assets
denominated in that currency. Under normal circumstances, we consider the
long-term prospects for a particular currency. We incorporate the prospects into
our overall long-term diversification strategies. However, we believe that it is
important to have the flexibility to enter into such forward contracts when we
determine that it is in the Fund's best interest.
At the maturity of a forward contract for a Fund, we may either: (1) sell the
portfolio securities and make delivery of the foreign currency; or (2) retain
the securities and terminate our contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating us to purchase, on
the same maturity date, the same amount of foreign currency.
If we retain the portfolio securities and engage in an offsetting transaction
for the Fund, we will incur a gain or a loss to the extent that there has been
movement in forward contract prices. If we enter into an offsetting transaction,
we may subsequently enter into a forward contract to sell the foreign currency.
Should forward prices decline during the period when we entered into a forward
contract to sell a foreign currency and the date we entered into an offsetting
contract to buy a foreign currency, we will realize a gain to the extent the
price of the currency we agreed to sell exceeds the price of the currency we
agreed to buy. Should forward prices increase, we will suffer a loss to the
extent that the price of the currency we agreed to buy exceeds the price of the
currency we agreed to sell for a Fund. We may not be able to hedge against a
currency devaluation at a price above the level where the market itself has
anticipated the currency's devaluation.
A foreign currency hedge transactions does not protect against or eliminate
fluctuations in the prices of particular portfolio securities. For example, a
foreign currency hedge transaction does not prevent a security's price decline
due to an issuer's deteriorating credit situation. We also cannot forecast with
precision the market value of securities at the expiration of a forward
contract. Accordingly, we may have to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if: (1) the market value
of the Fund's securities are less than the amount of the foreign currency we are
obligated to deliver for the Fund; and (2) we made a decision to sell the
foreign securities and make delivery of the foreign currency upon expiration of
the contract for the Fund. Conversely, we may have to sell some of a Fund's
foreign currency received upon the sale of a portfolio security if the market
value of the Fund's securities exceed the amount of foreign currency we are
obligated to deliver for the Fund. We limit our dealings in forward foreign
currency exchange contracts for a Fund to the transactions described above.
Although we value the Funds' assets daily in terms of U.S. dollars, we do not
intend to convert their holdings of foreign currencies into U.S. dollars on a
daily basis. From time to time, however, we will convert a Fund's foreign
currency holdings into U.S. dollars. There are costs associated with converting
foreign currencies into U.S. dollars and you should be award of these costs.
Although foreign exchange dealers do not charge a fee for conversion, they
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to us for a Fund at one rate, while offering a lesser
rate of exchange should we desire to resell that currency to the dealer for the
Fund.
Options and Futures Relating to Foreign Currencies
We may purchase and sell currency futures and purchase and write currency
options to increase or decrease a Fund's exposure to different foreign
currencies. We also may purchase and write currency options in conjunction with
the currency futures or forward contracts of the Fund's other series. The uses
and risks of currency options and futures are similar to options and futures on
securities or indices, as discussed above.
Currency futures contracts are similar to forward foreign currency contracts,
except that they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars.
The underlying instrument of a currency option generally is either a foreign
currency or a currency futures contract. The purchaser of a currency call option
obtains the right to purchase the underlying currency. The purchaser of a
currency put option obtains the right to sell the underlying currency.
Currency futures and options values correlate with exchange rates. However, the
futures and options values do not reflect other factors affecting a Fund's
investment value. A currency hedge, for example, should protect a Japanese
Yen-denominated security from a decline in the Yen. The currency hedge, however,
will not protect the particular Fund's Yen denominated investments against a
price decline in the Yen denominated security resulting from deterioration in
the issuers' creditworthiness. Because the value of a Fund's foreign-denominated
investments change in response to many factors other than exchange rates, we
have difficulty matching the exact value of any hedge in currency options and
futures to the value of our foreign investments for a Fund overtime.
Privately Issued Securities: The AAL Money Market Fund
We may invest in securities issued by major corporations without registration
under the Securities Act of 1933 for The AAL Money Market Fund in reliance on
certain exemptions, including the "private placement" exemption afforded by
Section 4(2) of that Act. Section 4(2) paper is restricted as to disposition
under the federal securities laws in that any resale must be made in an exempt
transaction. This paper normally is resold to other institutional investors
through or with the assistance of investment dealers who make a market in it,
thus providing liquidity. In our opinion (as the Adviser), Section 4(2) paper is
no less liquid or salable than commercial paper issued without legal
restrictions on disposition. However, should we deem that section 4(2) paper
issue is illiquid, we would purchase such security for a Fund only in accordance
with our limitations on illiquid securities. See "Additional Investment Factors
and Risks Regarding the Funds -- Illiquid and Restricted Securities" in the
prospectus.
Variable Rate Demand Notes--The AAL Small Cap Stock, Mid Cap Stock,
International, Capital Growth, Equity Income, Balanced, High Yield Bond, Bond
and Money Market Funds
We may purchase variable rate master demand notes for The AAL Small Cap Stock,
Mid Cap Stock, International, Capital Growth, Equity Income, Balanced, High
Yield Bond, Bond and Money Market Funds. Variable rate, master demand notes are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for period adjustments in the interest rate. The extent to which we can
purchase these securities for the Funds listed is subject to Rule 2a-7 under the
Investment Company Act of 1940. These notes normally do not trade and there is
no secondary market for the notes. However, we may demand payment of the
principal for a Fund at any time. We limit our purchases of variable rate,
master demand notes for a Fund to those: (1) rated in one of the two highest
rating categories by a NRSRO; or (2) that have been issued by an issuer that has
received a rating from the requisite NRSRO in the top two categories with
respect to a class of short-term debt obligations that is comparable in priority
and security with the instrument. If an issuer of a variable rate, master demand
note defaulted on its payment obligation, we might not be able to dispose of the
note for a Fund due to the absence of a secondary market. We might suffer a loss
to the extent of the default for the Fund. We only invest in variable rate
master demand notes only when we deem them to involve minimal credit risk.
Investments In Other Investment Companies
Due to the administration and distribution expenses of managing a mutual fund,
our investments in other investment companies (mutual funds, which are limited
by fundamental investment restriction 14 below) may cause us to increase
payments of such expenses for a Fund.
Investment Restrictions
We operate under the following investment restrictions. For any Fund, we may
not:
(1) invest more than 5% of its net assets (or 5% of The AAL Small Cap
Stock, International, Balanced or High Yield Bond Funds' total assets),
taken at value at the time of each investment, in the securities (including
repurchase agreements) of any one issuer (for this purpose, the issuer(s)
of a debt security being deemed to be only the entity or entities whose
assets or revenues are subject to the principal and interest obligations of
the security), except that up to 25% of Fund's net assets (or 25% of The
AAL Small Cap Stock, International, Balanced or High Yield Bond Funds'
total assets) may be invested without regard to this limitation and
provided that such restrictions shall not apply to obligations issued or
guaranteed by the U.S. government or any agency or instrumentality thereof;
(2) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but
we may make margin deposits in connection with transactions in options,
futures and options on futures for a Fund;
(3) make short sales of securities or maintain a short position, or write,
purchase, or sell puts, calls, straddles, spreads, or combinations thereof,
except for the described transactions in options, futures, options on
futures and short sales against the box;
(4) make loans to other persons, except that we reserves freedom of action,
consistent with a Fund's other investment policies and restrictions and as
described in the prospectus and this statement of additional information,
to: (a) invest in debt obligations, including those that are either
publicly offered or of a type customarily purchased by institutional
investors, even though the purchase of such debt obligations may be deemed
the making of loans; (b) enter into repurchase agreements; and (c) lend
portfolio securities, provided we may not loan securities for a Fund if, as
a result, the aggregate value of all securities loaned would exceed 33% of
its total assets (taken at market value at the time of such loan);
(5) issue senior securities or borrow, except that we may borrow for a Fund
in amounts not in excess of 10% of its net assets, taken at current value,
and then only from banks as a temporary measure for extraordinary or
emergency purposes (we will not borrow money for the Funds to increase
income, but only to meet redemption requests that otherwise might require
untimely dispositions of portfolio securities; interest paid on any such
borrowing will reduce a Fund's net income);
(6) mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by a Fund except as may be
necessary in connection with and subject to the limits in restriction (5);
(7) underwrite any issue of securities, except to the extent that we
purchase securities directly from an issuer thereof in accord with a Fund's
investment objectives and policies may be deemed to be underwriting or to
the extent that in connection with the disposition of portfolio securities
we may be deemed an underwriter for the Fund under federal securities laws;
(8) purchase or sell real estate, or real estate limited partnership
interests provided that we may invest in securities for a Fund secured by
real estate or interests therein or issued by companies that invest in real
estate or interests therein;
(9) purchase or sell commodities or commodity contracts, except that a we
may purchase or sell futures and options thereon for hedging purposes for a
Fund as described this statement of additional information;
(10) invest more than 25% of a Fund's net assets (or 25% or more of The AAL
Small Cap Stock, International, Balanced or High Yield Bond Funds' total
assets), taken at current value at the time of each investment, in
securities of non-governmental issuers whose principal business activities
are in the same industry (or 25% or more of The AAL Small Cap Stock,
International, Balanced or High Yield Bond Funds' total assets) in any
single industry or issuer (except the U.S. government or any agency or
instrumentality thereof);
(11) invest in oil, gas or mineral related programs or leases except as may
be included in the definition of public utilities, although we may invest
in securities of enterprises engaged in oil, gas or mineral exploration for
a Fund;
(12) invest in repurchase agreements maturing in more than seven days or in
other securities with legal or contractual restrictions on resale if, as a
result thereof, more than 10% of a Fund's net assets (taken at current
value at the time of such investment) would be invested in such securities;
(13) except for The AAL High Yield Bond Fund, invest in any security if as
a result a Fund would have more than 5% of its net assets invested in
securities of companies which, together with any predecessors, have been in
continuous operation for less than three years;
(14) purchase securities of other investment companies, if the purchase
would cause more than 10% of the value of a Fund's net assets (or 10% of
the value of The AAL Small Cap Stock, International, Balanced or High Yield
Bond Funds' total assets), to be invested in investment company securities
provided that: (a) no investment will be made in the securities of any one
investment company if immediately after such investment more than 3% of the
outstanding voting securities of such company would be owned by a Fund or
more than 5% of the value of a Fund's net assets (or 5% of the value of The
AAL Small Cap Stock, International, Balanced or High Yield Bond Funds'
total assets) would be invested in such company; and (b) no restrictions
shall apply to a purchase of investment company securities in connection
with a merger, consolidation acquisition or reorganization; or
(15) purchase more than 10% of the outstanding voting securities of an
issuer or invest for the purpose of exercising control or management.
Each of the above restrictions (1) through (15), as well as each Fund's
investment objective, except for The AAL Balanced and High Yield Bond Funds, is
a fundamental policy.
Purchases and Redemptions; Pricing Considerations
We determine the Funds' net asset value only on the days on which the New York
Stock Exchange ("NYSE") is open for trading. That NYSE is regularly closed on
Saturdays and Sundays and on New Years' Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and
Christmas. If one of these holidays falls on a Saturday or Sunday, the NYSE
closes on the preceding Friday or the following Monday, respectively.
We determine the net asset value for a Fund by adding up the value of a Fund's
assets, subtracting the Fund's liabilities, and dividing the balance by the
total number of shares outstanding. In determining the current market value for
securities traded or listed on an exchange, we use the last sale price on the
exchange where the securities primarily trade. For securities that have readily
available market quotations, we use an over-the-counter or exchange bid
quotation. When a Fund holds securities or other assets that do not have readily
available market quotations or are restricted, we value them at fair market
value, as we determine in good faith under the direction of our Board of
Trustees. We may use pricing services in determining the current or fair market
value of securities held in the Funds' portfolios. We value money market
instruments with a remaining maturity of 60 days or less on an amortized costs
basis. We comply with the SEC's requirements for using an amortized cost
valuation method.
Many long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities and foreign securities do not have reliable market quotations and are
not considered to be readily available for purchase or sale.
To determine the current or fair market value for debt securities, we may, and
generally will, use a pricing service or services approved by the Board of
Trustees. A pricing service generally will determine valuations based upon
normal, institutional-size trading units of such securities using market
transactions for comparable securities and various relationships between
securities generally recognized by institutional traders.
We generally price foreign securities in terms of U.S. dollars at the official
exchange rate. Alternatively, we may price these securities at the average of
the current bid and asked price of such currencies against the dollar last
quoted by a major bank. The bank must be a regular participant in the foreign
exchange market. We also may price foreign securities on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If management does not have any of these alternatives available or the
alternatives do not provide a suitable method for converting a foreign currency
into U.S. dollars, the Board of Trustees in good faith will establish a
conversion rate for such currency.
Generally, U.S. government securities and other fixed income securities complete
trading at various times prior to the close of the NYSE. For purposes of
computing net asset value, we use the market value of any such securities as of
the time their trading day ends. Occasionally, events affecting the value of
such securities may occur between the times these markets close and the time the
NYSE closes. We generally will not reflect these events in the computation of a
Fund's net asset value, unless they are material. If there is a material event,
we will value such securities at their fair value as determined in good faith by
the Board of Trustees.
Foreign securities do no trade on all the days when the NYSE is open. Foreign
securities also may trade on Saturdays and other days when NYSE is not open and
when we do not calculate the Funds' net asset values. We value foreign
securities primarily listed and/or traded in foreign markets at the price as of
the close on its primary market. Unless we determine (under the supervision of
the Board of Trustees) that material events have occurred affecting the value of
a Fund's foreign securities between the time the foreign securities' primary
market closed and NYSE's close, we will not reflect the change in the Fund's net
asset value. As a result, trading on days when a Fund is not accepting purchases
or redemptions may significantly affect a Fund's net asset value.
We intend to pay all redemptions in cash. We are obligated to redeem shares
solely in cash up to the lesser of $250,000 or one percent of the net assets of
a Fund during any 90-day period for any one shareholder. However, we may pay
redemptions in excess of such limit in whole or part by a distribution in kind
of securities. If and to the extent we redeem shares in kind, you, as a
redeeming shareholder might incur brokerage fees in selling the securities
received.
We reserve the right for each Fund to suspend or postpone redemptions during any
period when: (a) trading on the NYSE is restricted, as determined by the SEC, or
that the NYSE is closed for other than customary weekend and holiday closings;
(b) the SEC has by order permitted such suspension; or (c) an emergency, as
determined by the SEC, exists, making disposal of a Fund's portfolio securities
or valuation of its net assets not reasonably practicable.
The AAL Money Market Fund-Amortized Cost Valuation
We value The AAL Money Market Fund's portfolio securities on the basis of their
amortized cost. Amortized cost is an approximation of market value, whereby the
difference between acquisition cost and value at maturity is amortized on a
straight-line basis over the remaining life of the instrument. The effect of
changes in the market value of a security as a result of fluctuating interest
rates is not taken into account. The amortized cost method of valuation may
result in the value of a security being higher or lower than its actual market
value. In addition, if a large number of redemptions take place at a time when
interest rates have increased, we may have to sell portfolio securities for a
Fund prior to maturity and at a less desirable price.
Although we cannot assure you that we will be able to do so, we will use our
best efforts to maintain a net asset value of $1.00 per share for purchases and
redemptions of The AAL Money Market Fund. The Board of Trustees has established
procedures for this purpose. These procedures require us to review the extent of
any deviation in the Fund's net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. Should the deviation exceed
1/2 of 1% for the Fund, the Board of Trustees will promptly consider whether we
should initiate efforts to eliminate or reduce material dilution or other unfair
results to shareholders. Such action may include redemption of shares in kind,
selling portfolio securities prior to maturity, reducing or withholding
dividends, and utilizing a net asset value per share as determined by using
available market quotations. We maintain a dollar-weighted average portfolio
maturity of 90 days or less for the Fund. We also do not purchase any instrument
deemed to have a remaining maturity greater than 397 days. We limit portfolio
investments, including repurchase agreements, to those dollar denominated
instruments that the Board of Trustees determines present minimal credit risks
pursuant to our advise as the Adviser. We also comply with the SEC requirements
on the quality of certain portfolio securities for money market funds using the
amortized cost method of valuation. We also comply with the SEC reporting and
record keeping procedures regarding money market funds. We cannot assure you
that we can maintain a constant net asset value at all times. In the event
amortized cost ceases to represent fair value, the Board of Trustees will take
appropriate action.
Letter of Intent
Under a Letter of Intent, as described in the prospectus, our transfer agent,
Firstar Trust Company ("Firstar") holds shares totaling 5% of the dollar amount
you indicated in your name as the purchaser. A Letter of Intent neither
obligates you to purchase nor requires us to sell the indicated amount. If you
do not invest the amount indicated within the 13-month period, you, as the
purchaser, are required to pay the difference between the sales commission
otherwise applicable to the purchases made during this period and sales charges
actually paid. When the Letter of Intent expires, we liquidate sufficient shares
in escrow to obtain the difference.
Compensation of the Board of Trustees
The Funds do not make payments to any of the officers for services to the Trust.
The Funds, however, pay the independent Trustees (those who are not officers or
employees of AAL CMC or the Aid Association for Lutherans ("AAL")) an annual fee
of $25,000. The Funds assess these fees ratably to each series of the AAL Mutual
Funds. The Funds reimburse the Trustees for any expenses they may incur by
reason of attending such meetings or in connection with services they may
perform for The AAL Mutual Funds. For the fiscal year ended April 30, 1998, the
Funds paid an aggregate of $85,751 in Trustees' fees and expenses.
<TABLE>
<CAPTION>
Name of Capacities Aggregate Pension or Estimated Total
Person in which Remuneration Retirement Annual Compensation
Remuneration Benefits Benefits from
Received Accrued Upon Registrant
During Retirement and Fund
Last Complex Paid
Fiscal Year to Trustees*
<S> <C> <C> <C> <C> <C>
Ronald G. Trustee - - - -
Anderson
dob 10/2/48
John H. Pender Trustee - - - -
dob 5/25/30
Richard L. Trustee - - - -
Gunderson **
dob 6/14/33
John O. Gilbert** Trustee - - - -
dob 8/30/42
F. Gregory Trustee $19,500 - - $25,000
Campbell
dob 2/16/39
R. W. Russler Trustee $19,500 - - $25,000
dob 10/28/28
Richard L. Gady Trustee $19,500 - - $25,000
dob 2/28/43
Lawrence M. Trustee $19,500 - - $25,000
Woods dob
4/14/32
</TABLE>
* The Fund complex includes the AAL Variable Product Series Fund, Inc.
** As of January 1, 1998, Mr. Gunderson retired from the Board of Trustees and
Mr. Gilbert joined the Board of Trustees.
Investment Advisory Services
Please refer to our description of the adviser, advisory agreement and fees
under "Management of the Trust" in the prospectus. We have incorporated the
prospectus herein by reference.
The following executive officers of the Trust also serve as officers or
directors of the adviser, AAL CMC, as shown:
<TABLE>
<CAPTION>
<S> <C>
Ronald G. Anderson President; Director and President of AAL Capital Management Corporation since
222 West College Avenue 2/26/97
Appleton, WI 54919-0007
dob 10/2/48
Robert G. Same Secretary; Director since 1987, Executive Vice President, since 2/14/97, and
222 West College Avenue Secretary of AAL Capital Management Corporation since 1987
Appleton, WI 54919-0007
Terrance P. Gallagher Treasurer; Director and Chief Financial Officer of AAL Capital Management
222 West College Avenue Corporation since 1994, Controller since 1992 and Senior Vice President since 1996
Appleton, WI 54919-0007
dob 9/20/58
</TABLE>
The adviser, AAL CMC, furnishes and pays for all office space and facilities,
equipment and clerical personnel necessary for carrying out the adviser's duties
under the advisory agreement. The adviser also pays all compensation of
Trustees, officers and employees of the Trust who are the adviser's affiliated
persons. All costs and expenses not expressly assumed by the adviser under the
advisory agreement are paid by the Funds, including, but not limited to: (a)
interest and taxes; (b) brokerage commissions; (c) insurance premiums; (d)
compensation and expenses of the Funds' Trustees other than those affiliated
with the adviser; (e) legal and audit expenses; (f) fees and expenses of the
Trust's custodian and transfer agent; (g) expenses incident to the issuance of
the Trust's shares, including stock certificates and issuance of shares on the
payment of, or reinvestment of, dividends; (h) fees and expenses incident to the
registration under Federal or state securities laws of the Trust or its shares;
(i) expenses of preparing, printing and mailing reports and notices and proxy
material to the Trust's shareholders; (j) all other expenses incidental to
holding meetings of the Trust's shareholders; (k) dues or assessments of or
contributions to the Investment Company Institute or its successor, or other
industry organizations; (l) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations that the Trust may have
to indemnify its officers and Trustees with respect thereto; and (m) all
expenses that the Trust agrees to bear in any distribution agreement or in any
plan adopted by the Trust pursuant to Rule 12b-1 under the Act.
The adviser may waive its advisory fees for, assume or reimburse the expenses
of, any Fund at any time. As of September 1, 1997, the adviser is waiving .225
of 1% of its .50 of 1% maximum advisory fee for The AAL Money Market Fund.
Effectively, the adviser is charging only a 0.275 of 1% advisory fee for the
Fund. The adviser is reimbursing The AAL High Yield Bond Fund expenses in excess
of 1.00% and 1.75% for Class A and Class B shares, respectively. Any fee waivers
or expense assumptions the adviser makes are voluntary. The adviser may
discontinue any fee waivers or expense reimbursements at any time. The Funds
have paid advisory fees net of reimbursements to the adviser, for the past three
fiscal years ended April 30, 1998, as follows:
<TABLE>
<CAPTION>
For the Year Ended April 30, 1996 April 30, 1997 April 30, 1998
<S> <C> <C> <C>
Small Cap Stock Fund N/A $159,016 $690,590
Mid Cap Stock Fund $2,207,510 $3,188,294 $4,070,582
International Fund $183,656 $873,585 $1,280,101
Capital Growth Fund $7,332,620 $9,121,422 $12,742,588
Equity Income Fund $445,179 $643,863 $809,233
Balanced Fund N/A N/A $27,618
High Yield Bond Fund N/A $60,205 $522,217
Municipal Bond Fund $2,215,237 $2,153,751 $2,163,729
Bond Fund $2,410,603 $2,214,486 $1,921,733
Money Market Fund $448,619 $780,148 $1,088,957
</TABLE>
From the adviser's advisory fees, it pays the sub-advisory fees for The AAL
International Fund in accordance with the formula set forth in the prospectus.
Prior to November 1, 1995, we paid sub-advisory fees from the advisory fees
received for The AAL Mid Cap Stock, Capital Growth, Equity Income, Municipal
Bond, Bond and Money Market Funds.
The advisory agreement and sub-advisory agreement for The AAL International Fund
provide that subject to Section 36 of the Act, 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
advisory agreement except for willful misfeasance, bad faith or gross negligence
in the performance of their duties or by reason of reckless disregard of their
obligations and duties under the agreements.
The Trust has agreed to use its best efforts to change its name if we, as the
adviser (AAL CMC) cease to act as such with respect to the Funds. The continued
use of the Trust's present name (The AAL Mutual Funds) would create confusion in
the context of the Adviser (AAL CMC) or AAL's business.
The investment advisory agreement was approved by the Board of Trustees,
including a majority of the Trustees who were not interested persons (as defined
in the Act) of any party to the agreement on August 21, 1990, and was approved
by the shareholders of The AAL Municipal Bond Fund on November 27, 1990, and The
AAL Capital Growth, Bond and Money Market Funds on December 20, 1990. After
December 20, 1990, the advisory agreement was approved for:
The AAL Mid Cap Stock Fund by the Board of Trustees on May 18, 1993, and
the sole shareholder on June 30, 1993;
The AAL Equity Income Fund by the Board of Trustees on February 24, 1994,
and the sole shareholder on March 18, 1994;
The AAL International Fund by the Board of Trustees on May 23, 1995, and
the sole shareholder on July 31, 1995;
The AAL Small Cap Stock Fund by the Board of Trustees on February 23, 1996,
and the sole shareholder on July 1, 1996;
The AAL High Yield Bond Fund by the Board of Trustees on May 29, 1996, and
the sole shareholder on January 8, 1997; and
The AAL Balanced Fund by the Board of Trustees on November 19, 1997, and
the sole shareholder on January 2, 1998.
On October 16, 1995, the Board of Trustees terminated the sub-advisory
agreements (effective November 1, 1995) with, and approved the assumption of the
duties by us (as the adviser) of, the sub-advisers, Duff & Phelps Investment
Management Co., and Pilgrim Baxter & Associates Ltd., for The AAL Mid Cap Stock,
Capital Growth, Equity Income, Municipal Bond, Bond and Money Market Funds. The
Board of Trustees also approved reductions in the advisory fees for these Funds.
On May 23, 1995, the Board of Trustees, including a majority of the Trustees who
were not interested persons (as defined in the Act) of any party to the
agreement approved the current sub-advisory agreement with Societe Generale
Asset Management Corp. ("SoGen") for The AAL International Fund.
The advisory agreement and sub-advisory agreement will continue in effect from
year to year only so long as such continuances are specifically approved at
least annually by the Board of Trustees. The vote for approval must include the
approval of a majority of the Trustees who are not interested persons (as
defined in the Act). The advisory and sub-advisory agreements are terminable
upon assignment. The advisory agreement is also terminable at any time without
penalty by the Board of Trustees or by vote of the holders of a majority of the
outstanding voting securities of the Trust. With respect to a particular Fund,
the advisory or sub-advisory agreement, if any, is terminable by the vote of a
majority of the outstanding shares of such Fund. The adviser may terminate the
agreement on 60 days written notice to the Trust.
Distributor
The distributor, AAL CMC, is the exclusive underwriter for the Funds. The
distributor has a written distribution agreement with the Funds, dated June 15,
1987, as amended. The distributor offers the Funds' shares for sale on a
continuous basis through its field sales force.
Class A Shares: The public offering price of a Fund's Class A share is the net
asset value next computed plus a sales charge that varies based on the quantity
purchased. The public offering price of a Fund's Class A share is calculated by
dividing the net asset value of the Class A share being purchased by the
difference (expressed as a decimal) between 100% and the sales charge percentage
of the offering price applicable to the purchase (See "Buying Shares In The
Funds" in the Prospectus). The sales charge scale set forth in the prospectus
applies to purchases of Class A shares of a particular Fund alone or in
combination with shares of all classes of the other Funds (as noted under "Right
of Accumulation") by any person, including family members who live with the
purchaser (i.e., husband, wife and minor children) and bona fide trustees. The
sales charge scale also applies to purchases made under the right of
accumulation or letter of intent as set forth in the prospectus. The distributor
offers a reduction in the sales charges for a Fund for non-profit organizations,
charitable trusts, charitable remainder Unitrusts, endowments, AAL branches and
congregations (See "50% Reduction" in the Prospectus).
The distributor does not receive compensation in connection with redemptions and
repurchases or brokerage commissions for Class A shares.
The amount of underwriting commissions received and retained by the distributor
for the past three years ended April 30, 1998 for Class A Shares were as
follows:
Class A Shares
For the Fiscal Year Ended Aggregate Commissions Retained Commissions
April 30, 1996 $17,870,771 $5,027,588
April 30, 1997 $18,026,973 $7,289,125
April 30, 1998 $18,088,340 $7,783,221
Class B Shares: The public offering price of a Fund's Class B share is the net
asset value (See "Buying Shares in the Funds" in the prospectus). The
distributor began offering Class B shares for the Funds on January 8, 1997. From
January 8, 1997, through April 30, 1998, the aggregate redemption fees
(underwriting commissions) received and retained by the distributor were as
follows:
Class B Shares
Time Period Aggregate Commissions Retained
Commissions
From 1/8/97 to the fiscal year $71 $71
ended 4/30/97
Fiscal year ended 4/30/98 $36,668 $36,668
Institutional Shares: The public offering price of a Fund's Institutional shares
is the net asset value. The distributor began offering the Institutional shares
for the Funds on December 29, 1997. For information on Institutional shares,
please see the separate prospectus and statement of additional information.
General
The distributor, AAL CMC, acts as exclusive underwriter for Institutional shares
and two additional series of The AAL Mutual Funds: The AAL U.S. Government Zero
Coupon Target Fund, Series 2001; and The AAL U.S. Government Zero Coupon Target
Fund, Series 2006.
Distribution Plan
The Funds have adopted a distribution plan for Class A and Class B shares (the
"Distribution Plan" or "Plan") pursuant to Rule 12b-1 (the "Rule") under the
Act.
The Distribution Plan authorizes the distributor, AAL CMC, to make certain
payments (either as a "12b-1 distribution fee" or a "service fee") to any
qualified recipient. As defined in the Plan, the qualified recipient must have
rendered assistance in the distribution of the Funds' shares (such as selling or
placing the Funds' shares, or providing administrative assistance, such as
maintaining sub-accounting or other records). The Plan authorizes the
distributor purchase advertising for the Funds' shares, to pay for sales
literature and other promotional material, and to make payments to the sales
personnel. The Distribution Plan does not cover Institutional shares. As a
result, the Funds may not make any payments pursuant to the Plan in connection
with Institutional shares.
The Funds reimburse any payments made or expenses incurred under the Plan to
qualified recipients for Class A and Class B shares as follows:
Class A Shares -- The AAL Small Cap Stock, Mid Cap Stock, International, Capital
Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond and Money
Market Funds -- In a given fiscal year, the Funds, pursuant to the Plan, pay up
to a limit of 0.25 of 1% of the average net assets (0.125 of 1% for The AAL
Money Market Fund) as a service fee for Class A shares. The Funds do not
reimburse or pay for expenses of past fiscal years or in contemplation of
expenses for future fiscal years. Since September 1, 1997, the distributor has
waived 0.100 of 1% of the 0.125 of 1% maximum 12b-1 service fee for Class A
shares under the Plan for The AAL Money Market Fund (prior to January 8, 1997
Class A share, 12b-1 service fees were described as 12b-1 distribution fees),
effectively charging a 0.025 of 1%, 12b-1 service fee. This continuing
reimbursement (waiver) is voluntary. The distributor may modify or discontinue
its reimbursements at any time.
Class B Shares -- The AAL Small Cap Stock, Mid Cap Stock, International, Capital
Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond and Money
Market Funds -- In a given fiscal year, the Funds pay up to a limit of 0.75 of
1% of the average daily net assets as a 12b-1 distribution fee and up to a limit
of 0.25 of 1% of the average daily net assets as a service fee for Class B
shares. Pursuant to the Plan, the Funds do not reimburse or pay for expenses of
past fiscal years or in contemplation of expenses for future fiscal years. Since
September 1, 1997, the distributor has waived 0.100 of 1% of the 0.125 of 1%
maximum 12b-1 service fee for Class B shares under the Plan for The AAL Money
Market Fund, effectively charging a 0.025 of 1%, 12b-1 service fee. This
continuing reimbursement (waiver) is voluntary. The distributor modify or
discontinue its reimbursements at any time.
The Plan authorizes without limit any payments by a Fund for Class A and Class B
shares that are "primarily intended to result in the sale of shares" issued by a
Fund within the meaning of the Rule under the Plan. Such payments shall not be
included in the limitations contained in the Plan, including: (a) the costs of
the preparation, printing and mailing of all require reports and notices to
shareholders, irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of shares of the Fund or
other funds or other investments; (b) the costs of preparing, printing and
mailing of all prospectuses to shareholders; (c) the costs of preparing,
printing and mailing of any proxy statements and proxies, irrespective of
whether any such proxy statement includes any item relating to, or directed
toward, the sale of the Fund's shares; (d) all legal and accounting fees
relating to the preparation of any such reports, prospectuses, proxies and proxy
statements; (e) all fees and expenses relating to the qualification of the Funds
and or their shares under the securities or "Blue Sky" laws of any jurisdiction;
(f) all fees under the Act and the Securities Act of 1933, including fees in
connection with any application for exemption relating to or directed toward the
sale of the Fund's shares; (g) all fees and assessments of the Investment
Company Institute or any successor organization or industry association
irrespective of whether some of its activities are designed to provide sales
assistance, (h) all costs of preparing and mailing confirmations of shares sold
or redeemed or share certificates and reports of share balances; and (i) all
costs of responding to telephone or mail inquiries of shareholders.
The Plan also states that the distribution costs of the Trust's Class A and
Class B shares are expected to exceed the sum of permitted payments, permitted
expenses, and the portion of the sales charge retained by us as the distributor
(AAL CMC). Our profits as the adviser (AAL CMC), if any, are to depend primarily
on the advisory fees paid by the Funds to us as the adviser. If and to the
extent that any investment advisory fees might, in view of any excess
distribution costs and our common ownership as the adviser and distributor (AAL
CMC), be considered as indirectly financing any activity primarily intended to
result in the sale of shares issued by the Funds, the payment of such fees is
authorized under the Plan. The Plan states that in taking any action
contemplated by Section 15 of the Act as to any investment advisory contract to
which the Trust is a party, the Board of Trustees, including its Trustees who
are not "interested persons" as defined in the Act, and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan ("Qualified Trustees"), shall, in acting on the terms of any
such contract, apply the "fiduciary duty" standard contained in Sections 36(a)
and (b) of the Act.
The Plan requires that while it is in effect, we, as the distributor, shall
report in writing at least quarterly to the Trustees, and the Trustees shall
review, the following: (a) the amounts of all payments, the identity of
recipients of each such payment, the basis on which each such recipient was
chosen and the basis on which the amount of the payments was were made; (b) the
amounts of expenses and the purpose of each such expense; and (c) all costs of
the other payments specified in the Plan (making estimates of such costs where
necessary or desirable) in each case during the preceding calendar or fiscal
quarter. The aggregate amount paid by the Funds to us, as the distributor, under
the Plan for Class A shares for the fiscal year ended April 30, 1998, and the
manner in which this amount was spent is as follows:
Class A Shares
Gross 12b-1 Fees Paid by the Funds for Class A Shares $10,071,408
Expenditures
Compensation to Registered Representatives $ 9,948,211
Other $ 123,197
The aggregate amount paid by the Funds to us, as the distributor, under the Plan
for Class B shares for the fiscal year ended April 30, 1998, and the manner in
which this amount was spent is as follows:
Class B Shares
Gross 12b-1 Fees Paid by the Funds for Class B shares $557,702
Expenditures
Compensation to Registered Representatives $276,574
Other $281,128
We and the Board of Trustees believe that the Distribution Plan and the service
and 12b-1 fees have a positive impact on the Funds' sales and the Funds'
retention of assets, both of which are beneficial to the Funds and the Funds'
shareholders.
The Trust's shareholders approved the Plan at the Trust's first meeting of
shareholders held on September 13, 1988. The Plan at that time and up until
January 8, 1997, included only the shares now referred to as Class A shares. As
of January 8, 1997, the Plan includes Class B shares. The Plan as Amended and
Restated was approved by the sole shareholder of the Trust's Class B shares on
January 8, 1997. The Plan will continue in effect from year-to-year only so long
as such continuance is specifically approved at least annually by the Board of
Trustees and the Qualified Trustees (as defined in the Plan) cast in person at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated at any time without penalty by a vote of a majority of the Qualified
Trustees . The Plan also may be terminated by the vote of the holders of a
majority of the outstanding voting securities for each class of shares of the
Trust. The Plan may be terminated with respect to any Fund by the vote of a
majority of the outstanding shares for each class of such Fund. The Plan may not
be amended to increase materially the amount of payments to be made for the
separate class shares without shareholder approval of the class. While the Plan
is in effect, the selection and nomination of those Trustees who are not
interested persons of the Trust is committed to the discretion of such
disinterested Trustees. Nothing in the Plan will prevent the involvement of
others in such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such disinterested
Trustees.
Portfolio Transactions
AAL CMC, as the adviser, and SoGen, as the sub-adviser for The AAL International
Fund, direct the placement of orders for the purchase and sale of the Funds'
portfolio securities.
The securities transaction costs for each Fund consist primarily of brokerage
commissions or dealer or underwriter spreads. Bonds and money market instruments
generally trade on a net basis and do not involve either brokerage commissions
or transfer taxes.
Occasionally, we may purchase securities directly from the issuer for a Fund.
For securities traded primarily in the over-the-counter market, we deal with the
sellers who make a market in the securities directly unless we can find better
prices and execution available elsewhere. Such dealers usually act as principals
for their own account. In placing portfolio transactions, we seek the best
combination of price and execution.
In determining which brokers provide best execution, AAL CMC looks primarily at
the prices quoted by the brokers. Normally, we place orders with the broker who
has the most favorable prices. Ordinarily, we expect to execute securities
transactions in the primary markets. In assessing the best net price, we
consider all relevant factors. The relevant factors include the security
market's breadth, the security's price, the broker or dealer's financial
condition and execution capability and the reasonableness of the commission, if
any (for the specific transaction and on a continuing basis). Although we are
the sole distributors for the Funds' shares, we (as the adviser) may in the
future consider the willingness of particular brokers to sell the Funds' shares
as a factor in the selection of brokers for the Funds' portfolio transactions.
However our selection would still be subject to the overall best price and
execution standard.
Assuming equal execution capabilities, we may take into consideration other
factors in selecting brokers or dealers. We may consider "brokerage and research
services" (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934), statistical quotations (specifically the quotations
necessary to determine the Funds' net asset values, and other information
provided to us or the sub-adviser for The AAL International Fund (or their
affiliates). We may also cause a Fund to pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. We must determine, in
good faith, however, that such commission was reasonable in relation to the
value of the brokerage and research services provided. The commission must be
reasonable in terms of that particular transaction or in terms of all the
accounts over which we, as an adviser, exercise investment discretion. It is
possible that certain of the services received by us attributable to a
particular transaction benefit one or more other accounts for which we exercise
investment discretion. The Funds paid $3,143,251, $4,205,263 and $ 1,697,844 in
brokerage commissions in each of past three fiscal years ending on April 30,
1998, 1997 and 1996, respectively.
Dividends, Distributions and Taxes
The AAL Small Cap Stock, Mid Cap Stock, International, Capital Growth,
Equity Income, Balanced, High Yield Bond, Bond and Money Market Funds
Except for The AAL Municipal Bond Fund, any dividends from net investment income
and short-term capital gains (collectively "income dividends") that we
distribute to you from the Funds are taxable to you as ordinary income whether
we have paid these distributions in cash or additional shares. Any long-term
capital gains ("capital gains distributions") that we distribute to you from the
Funds are taxable to you as long-term capital gains whether we have paid these
distributions in cash or additional shares. Long-term capital gains are treated
as long-term capital gains regardless of the length of time you have owned the
shares. We distribute substantially all of the Funds' net investment income and
net realized long-term capital gains to avoid the imposition of federal income
and excise tax liability. We pay any dividends for The AAL Small Cap Stock, Mid
Cap Stock and International Funds annually. We pay any dividends for The AAL
Capital Growth Fund semi-annually and we pay any dividends for the AAL Equity
Income and Balanced Funds quarterly. We accrue income dividends daily and pay
any dividends monthly for The AAL High Yield Bond, Bond and Money Market Funds.
We expect to distribute any capital gains annually for these Funds.
The AAL Municipal Bond Fund
For The AAL Municipal Bond Fund, we accrue any income dividends daily and
distribute any net investment income in monthly dividends. We distribute any net
realized capital gains at least annually. Dividends derived from the interest
earned on municipal securities constitute "exempt-interest dividends."
Generally, exempt-interest dividends are not subject to federal income tax.
Distributions of net realized capital gains (whether from tax-exempt or taxable
securities) are taxable to shareholders. We report the federal income tax status
of all distributions to shareholders annually. In the report, we allocate income
dividends between tax-exempt and taxable income (if any) in approximately the
same proportions as the Fund's total income during the year. Accordingly, income
derived from each of these sources by the Fund may vary substantially in any
particular distribution period from the allocation reported to shareholders
annually.
You may not be able to deduct any interest expense you incur on money borrowed
to purchase or carry shares of the Fund for federal income tax purposes. You
also may be subject to state and local taxes on dividends from this Fund,
including those which are exempt from federal income tax.
If you or your entity are "substantial users" (or persons who are related to
"substantial users") of facilities financed by industrial revenue bonds, you or
your entity should consult your tax advisers before purchasing shares of The AAL
Municipal Bond Fund. The term "substantial user" is defined generally to include
a "nonexempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of industrial development revenue bonds.
The 1986 Tax Reform Act subjects tax-exempt interest attributable to certain
"private activity bonds" to the individual and corporate alternative minimum
tax. Such tax-exempt interest includes, in the case of a regulated investment
company receiving interest on such bonds, a proportionate part of the
exempt-interest dividends paid by that company. We limit our investment in
private activity bonds to no more than 20% of the Fund's assets. Certain
corporate shareholders may be subject to a federal "environmental" tax with
respect to their receipt of dividends and distributions.
The AAL International Fund -- Foreign Withholding Tax
We may be subject to income and withholding taxes on income and gains derived
from The AAL International Fund's investments outside the U.S. Our payment of
such foreign taxes reduces the yield on investments for the Fund. Tax treaties
between certain countries and the U.S. may reduce or eliminate these foreign
withholding taxes. If more than 50% of the Fund's total asset value at the close
of any taxable year consists of foreign corporate stocks or other securities, we
may elect (for U.S. federal income tax purposes) to treat any foreign country
income or withholding taxes we have paid on behalf of the Fund as paid by the
Fund's shareholders. The foreign income or withholding taxes must be those that
could be treated as income taxes under U.S. income tax principles. For any year
we make such an election for the Fund, the shareholder must include as income
(in addition to taxable dividends received) his pro rata share of such foreign
income and withholding taxes. The shareholder is entitled, subject to certain
limitations, to credit his portion of these foreign taxes against his U.S.
federal income tax due or deduct it (as an itemized deduction) from his U.S.
taxable income. Generally, this foreign tax credit is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his foreign
source taxable income.
If we make the pass through election described above, the Fund's foreign income
flows through to the shareholders. The Internal Revenue Service will not treat
certain gains from the sale of securities and currency fluctuations as foreign
source taxable income. In addition, this foreign tax credit limitation must be
applied separately to certain categories of foreign source income, one of which
is foreign source "passive income." For this purpose, foreign "passive income"
includes dividends, interest, capital gains and certain foreign currency gains.
As a consequence, certain shareholders may not be able to claim a foreign tax
credit for the full amount of their proportionate share of the foreign tax paid
by the Fund.
Corporations and individuals can use the foreign tax credit to offset only 90%
of any alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed upon them. If we do not make the pass through election, the
foreign taxes we pay for the Fund will reduce the Fund's income. Any
distributions we make for the Fund will be treated as U.S. source income.
We will notify each shareholder within 60 days after the close of the Fund's
taxable year whether, pursuant to the election described above, we will make the
pass through election and treat any foreign taxes paid by the Fund as paid by
its shareholders for that year. If we make the pass through election, we will
designate the shareholder's portion of the foreign taxes paid to such country.
We also will designate the portion of the Fund's dividends and distributions
that represent income derived from sources within such country.
Our investments in certain foreign corporations that generate largely passive
investment type income, or that hold a significant percentage of assets which
generate passive income ("passive foreign investment companies" or "PFICs") are
subject to special tax rules. These special tax rules are designed to prevent
deferral of U.S. taxation on the Fund's share of the PFIC's earnings. In the
absence of certain elections to report these earnings on a current basis, we
would have to report certain "excess distributions" and any gain from the
disposition of PFIC's stock as ordinary income. We would have to report these
excess distributions and gains as ordinary income regardless of whether we
actually received any distributions from the PFIC. We would have to allocate
this ordinary income ratably throughout the holding period for the stocks. We
would have to pay taxes for the Fund on any amounts allocable to a prior taxable
year at the highest applicable tax rate from that year. We also would have to
increase this rate by an interest charge determined as though the amounts were
an underpayment of the tax for that year. We would have to include the amounts
allocated to the year of the distribution or disposition in the Fund's net
investment income for that year. To the extent the amounts allocated were
distributed as a dividend to shareholders such amounts would not be taxable to
the Fund.
Summary
We have only provided you with a summary of certain tax considerations generally
affecting the Funds and shareholders. We urge you to consult your tax advisors
with specific reference to your own tax situations, including state and local
tax liability.
Calculation of Yield and Total Return
From time to time we advertise the yields and total returns for the Funds' Class
A and Class B shares for various investment periods. We always include uniform
performance calculations based on standardized methods established by the SEC.
These calculations reflect the front-end sales charge on a Class A share and the
contingent deferred sales charge ("CDSC") on a Class B share. We also may
include other total return information without giving effect to sales charges.
Yields and total returns are calculated based on historical earnings and
appreciation. We do not intend any yield or total return calculations to
indicate future performance. You should consider performance information in
light of: the particular Fund's investment objectives and policies;
characteristics and quality of the Fund's portfolio securities; and the market
conditions during the applicable period. You should not consider the performance
information as a representation of what may be achieved in the future. When
comparing any such performance information to published performance data for
alternative investments, you should consider the differences in the methods used
in calculating performance information, and the impact of taxes on alternative
investments in addition to the factors listed.
Standardized Performance Information
Average Annual Total Return. For each of the Funds, except The AAL Money Market
Fund, we compute the standardized average annual total return by finding the
average annual compounded rates of return for Class A and Class B shares over
the 1, 5 and 10 year periods (or the portion thereof during which the Fund has
been in existence) that would equate the initial amount invested in each class
to the ending redeemable value according to the following formula:
T = (ERV/P)^(1/n) - 1
Where:
T = average annual total return for the class;
n = number of years and portion of a year;
ERV = ending redeemable value for the class (of the
hypothetical $1,000 payment) at the end of the
1, 5 and 10 year periods, or fractional portion
thereof, after deduction of all non-recurring
charges for the class (CDSC for Class B shares),
assuming redemption at the end of the period;
P = $1,000 (the hypothetical initial payment
before deduction of the maximum sales load, if
any); and
^ = raised to the power of.
Annual Returns for the 1 and 5-Year, 10-Year and Since Inception
Periods Ended April 30, 1998, for Class A Shares Based on Gross
Amount Invested
<TABLE>
<CAPTION>
The AAL Mutual Fund Total Return for the Average Annual Return Average Annual Return Average Annual Return
and Inception Date 1-Year Period for the 5-Year Period for the 10-Year Period for the Period Since
Inception for Funds in
existence for less
than 10 years
<S> <C> <C>
Small Cap Stock 42.05% N/A N/A 21.64%
7/1/96
Mid Cap Stock 33.18% N/A N/A 15.70%
6/30/93
International 3.08% N/A N/A 7.39%
8/1/95
Capital Growth 38.67% 19.20% 16.94% N/A
7/16/87
Equity Income 28.18% N/A N/A 12.26%
3/18/94
Balanced N/A N/A N/A 4.00%*
12/29/97
High Yield Bond 10.53% N/A N/A 9.19%
1/8/97
Municipal Bond 6.03% 5.66% 7.14% N/A
7/16/87
Bond 5.48% 4.47% 7.38% N/A
7/16/87
</TABLE>
* For Funds in existence for less than one year, the return number is not
annualized and indicates the rate of return for the period since inception
through April 30, 1998.
Annual Returns for the 1-Year and Since Inception Periods
Ended April 30, 1998, for Class B Shares Based on Gross
Amount Invested
<TABLE>
<CAPTION>
The AAL Mutual Fund and Total Return for the Average Annual Return for the
Inception Date 1-Year Period Period Since Inception
<S> <C> <C>
Small Cap Stock 46.86% 21.50%
1/8/97
Mid Cap Stock 37.41% 20.48%
1/8/97
International 6.30% 7.41%
1/8/97
Capital Growth 43.25% 35.50%
1/8/97
Equity Income 32.42% 23.93%
1/8/97
Balanced N/A 8.10%*
12/29/97
High Yield Bond 14.27% 11.86%
1/8/97
Municipal Bond 9.58% 7.52%
1/8/97
Bond 8.75% 7.42%
1/8/97
</TABLE>
* For Funds in existence for less than one year, the return number is not
annualized and indicates the rate of return for the period since inception
through April 30, 1998.
There is no standardized average annual return information for the five-year and
10-year periods, which is based on gross amount invested, available for Class B
shares. Class B shares first became available to investors on January 8, 1997.
Current Yield. We base current yield quotations for the Funds, except The AAL
Money Market Fund, on a 30-day (or one-month) period. We compute the current
yield by dividing the net investment income per share for each class earned
during the period by the maximum offering price per share for each class on the
last day of the period, according to the following formula:
Yield 2[((a - b)/(cd) + 1)^6 - 1]
where:
a = dividends and interest earned by the Class during the
period;
b = expenses accrued by the Class for the period (net
of reimbursements);
c = the average daily number of shares outstanding for
the Class during the period they were entitled to
receive dividends; and
d = the maximum offering price per share for the Class on
the last day of the period.
^ = to the power of.
For purposes of this calculation, we determine the income earned on debt
obligations by applying a calculated yield-to-maturity percentage to the
obligations held during the period. We calculate the Interest earned on
mortgage-backed securities by using the coupon rate and principal amount after
adjustment for a monthly pay down. We determine the income earned on stocks by
using the stated annual dividend rate applied over the performance period. The
current yields for The AAL Small Cap Stock, Mid Cap Stock, International,
Capital Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond and
Bond Funds for the 30-day period ended April 30, 1998, for Class A shares were:
The AAL Mutual Funds
Class A Share Yields
30-day period ended 4/30/98
Small Cap Stock -0.10% Balanced 1.76%
Mid Cap Stock -0.38% High Yield Bond 8.42%
International 2.86% Municipal Bond 4.07%
Capital Growth 0.32% Bond 5.09%
Equity Income 0.01%
The current yields for the AAL Small Cap Stock, Mid Cap Stock, International,
Equity Income, Balanced, High Yield Bond, Municipal Bond and Bond Funds for the
30-day period ended April 30, 1998 for Class B shares were:
The AAL Mutual Funds
Class B Share Yields
30-day period ended 4/30/98
Small Cap Stock -1.87% Balanced 1.38%
Mid Cap Stock -1.46% High Yield Bond 8.06%
International -1.02% Municipal Bond 3.44%
Capital Growth -0.67% Bond 4.54%
Equity Income -2.17%
When we are advertising yield for a Fund, we will not advertise a one-month or a
30-day period that ends more than 45 days before the date on which the
advertisement is published.
Tax Equivalent Yield. We calculate a tax equivalent yield for The AAL Municipal
Bond Fund based on a 30-day (or one-month) period for Class A and Class B
shares. We compute the tax equivalent yield by dividing the portion of the
Fund's yield for the share class (computed as described above) that is
tax-exempt by one minus a stated income tax rate and adding the quotient to the
portion of the yield that is not tax exempt. The formula for computation of the
tax equivalent yield is:
X = ( N/1-F) + T
Where:
N = % of yield for the class derived from tax-exempt income;
F = federal income tax rate; and
T = % of yield for the class derived from taxable income.
The tax equivalent yield at 31% tax rate for the 30-day period ended April 30,
1998, for a Class A share and a Class B share for The AAL Municipal Bond Fund
were 5.90% and 4.99%, respectively.
Current and Effective Yield - The AAL Money Market Fund. We may quote a current
or effective yield for The AAL Money Market Fund's Class A and Class B shares
from time-to-time. The current yield is an annualized yield based on the net
change in account value for each class for a seven-day period. The effective
yield is an annualized yield based on a daily compounding of the current yield
for each share class. We compute these yields by first determining the "Net
Change in Account Value" for each share class for a hypothetical account having
a share balance of one share at the beginning of a seven-day period ("Beginning
Account Value"), excluding capital changes. The Net Change in Account Value
always equals the total dividends declared with respect to the account. We
compute the yields for each share class as follows:
Current Yield = Net Change in Account Value Per Class 365
------------------------------------- ---
Beginning Account Value Per Class x 7
Effective Yield = [1 + Net Change in Account Value Per Class] 365/7 - 1
For the seven-day period ended April 30, 1998, the current and effective yields
of The AAL Money Market Fund for Class A shares were 4.74% and 4.85%,
respectively, and for Class B shares 2.49% and 2.52%, respectively.
Normal changes in the income earned and expenses affect the Fund's yield. Also,
any efforts we undertake to restrict or supplement the Fund's dividends to
maintain its net asset value at $1.00 will affect the Fund's yield. (See "Net
Asset Value" in the prospectus and in this statement of additional information.)
Any portfolio changes we make due to net purchases or redemptions will affect
the Fund's yield. Accordingly, the Fund's yield may vary from day to day. The
yield stated for a particular past period is not a representation as to its
future yield. We do not guarantee the Fund's yield and the Fund's principal is
not insured. Although there is no assurance that we will be able to do so, we
use our best efforts to maintain a net asset value of $1.00 per share for the
Fund.
Other Performance Information
We may from time to time, include in the Funds' sales literature and
advertisements: (1) total return quotations computed for different time periods
or by a method that differs from the computations described in the section above
for Class A and B shares; (2) calculations of the growth of an investment (or
series of investments), at various assumed interest rates and compounding, to
show the effect of the length of time, interest rate and/or tax deferral on an
investment for Class A and B shares; (3) illustrate the concepts of asset
allocation by use of hypothetical case studies using various risk levels and
life cycles, as well as illustrating the effect of various tax brackets and tax
deferrals on hypothetical systematic investing for Class A and Class B shares;
and (4) performance relative to the performance of other investments such as
stocks, bonds, closed end funds, certificates of deposit, as well as various
indices such as the Consumer Price Index and indices generated by lbbotson &
Associates and Chase Global Data and Research Products for Class A and B shares.
Average Annual Total Return. Except for The AAL Money Market Fund, we may
advertise an average annual total return calculation for Class A and Class B
shares for any appropriate time period, based upon the value of a net investment
in the Fund for the class. We deduct the maximum sales charge for Class A shares
and deduct the CDSC for Class B shares. We advertise average annual total return
for net amount invested according to the following formula:
T = (ERV/P)^(1/n)-1
where:
T = average annual total return for the class;
n = number of years and portion of a year;
ERV = ending redeemable value for the class (of the
hypothetical $1,000 investment) at the end of
any period after deducting all non-recurring
charges (CDSC for Class B shares) assuming
redemption at the end of the period;
P = $1,000 (the hypothetical initial net
investment after deduction of the sales load, if
any).
^ = raised to the power of.
Annual Returns for the 1 and 5-Year, 10-Year and Since Inception
Periods Ended April 30, 1998, for Class A Shares Based on Net
Amount Invested
<TABLE>
<CAPTION>
The AAL Mutual Fund Total Return for the Average Annual Return Average Annual Return Average Annual Return
and Inception Date 1-Year Period for the 5-Year Period for the 10-Year Period for the Period Since
Inception
<S> <C> <C> <C> <C>
Small Cap Stock 47.97% N/A N/A 24.40%
7/1/96
Mid Cap Stock 38.73% N/A N/A 16.69%
6/30/93
International 7.34% N/A N/A 9.01%
8/1/95
Capital Growth 44.48% 20.18% 17.42% 14.19%
7/16/87
Equity Income 33.50% N/A N/A 13.39%
3/18/94
Balanced N/A N/A N/A 8.37%*
12/29/97
High Yield Bond 15.12% N/A N/A 12.69%
1/8/97
Municipal Bond 10.50% 6.53% 7.58% 7.16%
7/16/87
Bond 9.86% 5.32% 7.82% 7.47%
7/16/87
</TABLE>
* For Funds in existence for less than one year, the return number is not
annualized and indicates the rate of return for the period since inception
through April 30, 1998.
Annual Returns for the 1-Year and Since Inception Periods Ended April
30, 1998, for Class B Shares Based on Net Amount Invested
<TABLE>
<CAPTION>
The AAL Mutual Fund and Total Return for the Average Annual Return for the
Inception Date 1-Year Period Period Since Inception
<S> <C> <C>
Small Cap Stock 42.86% 18.60%
1/8/97
Mid Cap Stock 33.41% 17.57%
1/8/97
International 2.30% 4.40%
1/8/97
Capital Growth 39.25% 32.00%
1/8/97
Equity Income 28.42% 21.06%
1/8/97
Balanced N/A 8.10%*
12/29/97
High Yield Bond 10.27% 8.89%
1/8/97
Municipal Bond 5.58% 4.52%
1/8/97
Bond 4.75% 4.41%
1/8/97
</TABLE>
* For Funds in existence for less than one year, the return number is not
annualized and indicates the rate of return for the period since inception
through April 30, 1998.
Performance information for Class A and B shares for the Funds may be compared
to various unmanaged indexes, such as Morgan Stanley's EAFE and World, Dow Jones
Industrial and Averages, the S&P 500, S&P MidCap 400, S&P Small Cap or Lehman
Brothers High Yield Index, Lehman Brothers Aggregate or other Lehman Bond
Indexes, as well as indices of similar mutual funds, and various foreign country
and currency indices. The Funds may include in their advertising rankings
published by recognized statistical services or publishers such as Morningstar,
Lipper Analytical Services, Inc., Weisenberger Investment Companies Services or
rankings shares published by other comparable national services that rank mutual
funds. They also may use information from publications such as Barron's,
Business Week, The Economist, Financial World, Forbes, Fortune, Kiplinger's
Personal Finance, Money, Smart Money, the Star, The Wall Street Journal or
Worth, and from videotapes of television shows and interviews involving
investment experts, including employees of the adviser and/or sub-adviser for
The AAL International Fund. Advertisements may depict performance graphically.
General
The AAL Mutual Funds' Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest. The
Declaration also permits the Trustees to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interest in a Fund. Pursuant to this authority, the Trustees have
issued Class A, Class B and Institutional shares for the Funds, except for The
AAL U.S. Government Zero Coupon Target Funds, Series 2001 and 2006. Each class
share represents an interest in a Fund proportionately equal to the interest of
each other share in its class. If the Trust liquidated the Funds' shares, all
shareholders of a Fund would share pro rata in its net assets for the class
available for distribution to shareholders. If the Board deems it advisable and
in the best interests of shareholders, it may create additional share classes.
These share classes may differ from each other only as to dividends or, as is
the case with the Funds, as to assets and liabilities. Where share classes
differ in regards to assets and liabilities, the different classes are referred
to as the different series of the Funds (i.e., The AAL Bond Fund is a series of
The AAL Mutual Funds). Within each series, the different classes of shares are
referred to as different share classes, such as Class A, Class B and
Institutional shares. Shares of each series are entitled to vote as a series
only to the extent required by the '40 Act or as permitted by the Trustees. The
Trustees allocate income and operating expenses among the different Funds'
series and classes of shares fairly.
As of April 30, 1998, the Trust's officers and Trustees owned less than 1% of
the shares of any Funds. As of April 30, 1998, the following account holders
held in excess of 5% of the following Funds' shares:
Ownership
Shareholder Percentage
25
LCMS Foundation
The AAL Bond Fund 7.58%
Except for the election of Trustees and ratification of the selection of
accountants, any matter that the Funds are required to submit to the
shareholders for a vote is not deemed to be effective unless approved by the
holders of a "majority" (as defined in the Rule) of the voting securities of
each Series affected by the matter.
The custodian for The AAL Small Cap Stock, Mid Cap Stock, Capital Growth, Equity
Income, Balanced, High Yield Bond, Municipal Bond, Bond and Money Market Funds
is Firstar Trust Company ("Firstar"). The custodian for The AAL International
Fund is The Chase Manhattan Bank, N. A. The custodians are responsible for
holding the Funds' assets.
Administrative Services Agreement
AAL CMC provides certain administrative, accounting and pricing services to the
Funds. These administrative services include calculating the daily net asset
value per class share; maintaining original entry documents and books of record
and general ledgers; posting cash receipts and disbursements; reconciling bank
account balances monthly; recording purchases and sales based on sub-adviser
communications (SoGen's communications regarding The AAL International Fund);
and preparing monthly and annual summaries to assist in the preparation of
financial statements of, and regulatory reports for, the Funds. Formerly,
Firstar, provided these administrative services. However, the Funds' Trustees
and shareholders approved an administrative services agreement with AAL CMC to
provide these administrative services for the Funds. The Administrative Services
Agreement was approved by a majority of the Trustees of the Funds, including a
majority of the Trustees who are not interested persons of the Funds or of the
Adviser and was approved by the shareholders of The AAL Municipal Bond Fund on
November 27, 1990 and of The AAL Capital Growth, Bond and Money Market Funds on
December 20, 1990. The Board of Trustees approved the addition of the following
Funds to this agreement on the following dates:
The AAL Mid Cap Stock Fund on May 18, 1993;
The AAL Equity Income Fund on February 24, 1994;
The AAL International Fund on May 23, 1995;
The AAL Small Cap Stock Fund on February 28, 1996;
The AAL High Yield Bond Fund on May 29, 1996; and
The AAL Balanced Fund on November 19, 1997.
The principal motivation for having AAL CMC, as the adviser for the Funds,
provide these services was cost. AAL CMC has agreed to provide these services at
rates that would not exceed the rates charged by unaffiliated vendors for
similar services. The annual rates of payment approved by the Trustees presently
are:
The AAL Small Cap Stock Fund - $40,000
The AAL Mid Cap Stock Fund - $40,000
The AAL International Fund - $45,000
The AAL Capital Growth Fund - $40,000
The AAL Equity Income Fund - $40,000
The AAL Balanced Fund - $40,000
The AAL High Yield Bond Fund - $40,000
The AAL Municipal Bond Fund - $40,000
The AAL Bond Fund - $40,000
The AAL Money Market Fund - $40,000
The AAL U. S. Government Zero Coupon Target Fund Series 2001 - $2,500
The AAL U. S. Government Zero Coupon Target Fund Series 2006 - $2,500
The agreement continues in effect from year to year, as long as it is approved
at least annually by the Funds' Board of Trustees or by a vote of the
outstanding voting securities of the Funds. In either case, the agreement must
also be approved at least annually by a majority of the Trustees who are not
parties to the agreement or interested persons of any such party. The agreement
terminates automatically if either party assigns the agreement. The agreement
also terminates without penalty by either party on 60-days' notice. The
agreement provides that neither AAL CMC nor its personnel shall be liable for
any error of judgment or mistake of law or for any loss arising out of any act
or omission in the execution and the discharge of its obligations under the
agreement, except for willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties under the agreement.
<PAGE>
Shareholder Maintenance Agreement
The Board of Trustees authorized the Funds to contract with AAL CMC for certain
shareholder maintenance services, effective April 1, 1995. These shareholder
services include answering customer inquiries regarding account status,
explaining and assisting customers with the exercise of their account options
and facilitating shareholder telephone transaction requests.
The annual fee payable to AAL CMC for providing such shareholder services is
based upon, and limited by, the difference between the current account fees
actually charged by Firstar Trust Company, as transfer and dividend disbursing
agent, and the normal full-service fee schedule published by Firstar Trust
Company. The annual fee is also based on reimbursement for certain actual
out-of-pocket costs including postage and telephone charges. This account
differential, including reimbursement for expenses, is at an annualized rate of
$4.30 per account, effective June 1, 1998. The shareholder maintenance agreement
continues in effect from year to year, as long as it is approved at least
annually by the Funds' Board of Trustees or by a vote of the outstanding voting
securities of the Funds. In either case, the agreement must be approved annually
by a majority of the Trustees who are not parties to the agreement or interested
persons of any such party. The agreement terminates automatically if either
party assigns the agreement. The agreement also terminates without penalty by
either party on 60-days notice. The Agreement provides that neither the Adviser
nor its personnel shall be liable for any error of judgment or mistake of law or
for any loss arising out of any act or omission in the execution and the
discharge of its obligations under the Agreement, except for willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties under the
Agreement. These fees are not currently assessed against the Fund but may be in
the future.
Independent Accountants
The Trust's independent accountants, Price Waterhouse LLP ("Price Waterhouse"),
examine the Funds' annual financial statements. Price Waterhouse also assists in
the preparation of certain reports to the SEC and reviews the Trust's state and
federal tax returns.
Financial Statements
The financial statements, notes to financial statements and report of
independent accountants for the Funds included in the Annual Report to
Shareholders of the Trust, for the year ended April 30, 1998, are hereby
incorporated by reference.
<PAGE>
THE AAL MUTUAL FUNDS
PART C
Class A and Class B shares
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: The AAL Mutual Funds ("Trust") has filed audited
financial statements for the Trust for the fiscal year ended April 30, 1998, for
the following series: The AAL Small Cap Stock, Mid Cap Stock, International,
Capital Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond
and Money Market Funds; and The AAL U.S. Government Zero Coupon Target Funds,
Series 2001 and 2006, contained in the Annual Reports for April 30, 1998, which
are incorporated by reference into this Post-Effective Amendment to this
Registration Statement. The AAL U. S. Government Zero Coupon Target Funds,
Series 2001 and 2006 and Institutional shares for The AAL Small Cap Stock, Mid
Cap Stock, International, Capital Growth, Equity Income, Balanced, High Yield
Bond, Municipal Bond, Bond and Money Market Funds are contained in a separate
prospectuses. The Trust has closed The AAL U. S. Government Zero Coupon Target
Funds, Series 2001 and 2006, to new investors.
(b) Exhibits: Except as noted below, all required exhibits have been
previously filed and are incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No. 33-12911), as amended:
(1) The AAL Mutual Funds Declaration of Trust;
(2) By Laws, as Amended;
(4) Share Certificates for The AAL Small Cap Stock, Mid Cap Stock,
International, Capital Growth, Equity Income, Balanced, High Yield Bond,
Municipal Bond, Bond and Money Market Funds;
(5)(a) Investment Advisory Agreement as Amended;
(5)(b) Sub-Advisory Agreement with Societe Generale Asset Management Corp, as
Amended;
(6) Distribution Agreement, as Amended;
(8)(a) First Amended Custodial Contract with Firstar Trust Company, as Amended;
(8)(b) Global Custody Agreement with Chase Manhattan Bank;
(9)(a) Transfer and Dividend Disbursing Agent Agreement, as Amended
(9)(b) Administrative Services Agreement, as Amended;
(9)(c) Shareholder Maintenance Agreement, as Amended
(10) Opinion and Consent of Counsel;
(11) Consent of Independent Auditors;
(14) Salary Reduction and Other Elective Simplified Employee Pension -
Individual Retirement Account Contribution Agreement (IRS Form 5305A-SEP);
SIMPLE Individual Retirement Custodial Account (IRS Form 5305-SA with
customized Article VIII); Roth Individual Retirement Custodial Account (IRS
Form 5305-RA with customized Article IX); Education Individual Retirement
Custodial Account (IRS Form 5305-EA with customized Article XI; Simplified
Employee Pension - Individual Retirment Accounts Contribution Agreement
(IRS Form 5305 SEP); Savings Incentive Match Plan for Employees of Small
Employers (SIMPLE) (IRS Form 5305-SIMPLE with customized Article IV and
Article VI); and Model Defined Contribution Plan and Adopting Agreements;
(15) Amended and Restated Distribution Plan, as Amended;
(16) Schedules for Computations of Performance for The AAL Balanced Fund, A and
B shares; and
(17) Financial Data Schedule (included as Exhibit 27);
(18) Amended and Restated Plan pursuant to Rule 18f-3.
Item 25. Persons Controlled by or under Common Control with Registrant
AAL Capital Management Corporation (the "Adviser" and "Distributor" for The AAL
Mutual Funds ("Trust")) was organized in 1986 as a Delaware corporation, all of
the shares of which are owned by AAL Holdings Inc., a wholly-owned subsidiary of
the 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. Under an Investment Advisory Agreement and a Distribution
Agreement with the Trust, and subject to the supervision of the Funds' Board of
Trustees, AAL Capital Management Corporation provides the investment advisory,
administrative, shareholder, distribution and other services for the Funds.
Item 26. Number of Holders of Securities
On June 1, 1998, the following indicates the number of record shareholders of
each series of the Registrant:
Class A Class B Class I
The AAL Small Cap Stock Fund - 28,420 5,874 3
The AAL Mid Cap Stock Fund - 87,795 5,477 7
The AAL International Fund - 29,334 3,369 4
The AAL Capital Growth Fund - 180,675 13,501 8
The AAL Equity Income Fund - 22,049 1,316 5
The AAL Balanced Fund - 4,189 624 3
The AAL High Yield Bond Fund - 8,124 1,420 3
The AAL Municipal Bond Fund - 17,410 409 1
The AAL Bond Fund - 25,997 321 1
The AAL Money Market Fund - 28,953 223 4
The AAL U.S. Government Zero Coupon Target Funds, Series 2001 - 210; and
The AAL U.S. Government Zero Coupon Target Funds, Series 2006 - 218.
Item 27. Indemnification
Under Section 12 of Article Seven of the Registrant's Declaration of Trust, the
Trust may not indemnify any trustee, officer or employee for expenses (e.g.,
attorney's fees, judgments, fines and settlement amounts) incurred in any
threatened, pending or completed action, if there has been an adjudication of
liability against such person based on a finding of willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's duties of office
("disability conduct").
The Trust shall indemnify its trustees, officers or employees for such expenses
whether or not there is an adjudication of liability, if, pursuant to Investment
Company Act Release 11330, a determination is made that such person was not
liable by reason of disabling conduct by: (i) final decision of the court before
which the proceeding was brought; or (ii) in the absence of such a decision, a
reasonable determination, based on factual review, that the person was not
liable for reasons of such conduct is made by: (a) a majority vote of
disinterested, non-party Trustees; or (b) independent legal counsel in a written
opinion.
Advancement of expenses incurred in defending such actions may be made pursuant
to Release 11330, provided that the person undertakes to repay the advance
unless it is ultimately determined that such person is entitled to
indemnification and one or more of the following conditions is met: (1) the
person provides security for the undertaking; (2) the registrant is insured
against losses arising by reason of any lawful advances; or (3) a majority of
disinterested non-party Trustees or independent legal counsel in a written
opinion determines, based on review of readily available facts, that there is
reason to believe the person ultimately will be found entitled to
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provision, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustees, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and other Connections of the Investment Adviser.
AAL Capital Management Corporation is the investment adviser ("Adviser") of the
Registrant. Societe Generale Asset Management Corp. is the sub-adviser for The
AAL International Fund. For information as to the business, profession, vocation
or employment of a substantial nature of the Adviser, reference is made to Parts
A and B of this Registration Statement and to Form ADV filed under the
Investment Advisers Act of 1940 by the Adviser.
Item 29. Principal Underwriters
(a) None
(b)
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Positions and Positions and Offices
Business Offices with with Registrant
Underwriter
Ronald G. Anderson Chairman of the Trustee and President
222 W. College Ave. Board of Directors
Appleton, WI 54919 and President
Robert G. Same Executive Vice President, Secretary and
222 W. College Ave. Secretary and Director Vice President
Appleton, WI 54919
Terrance P. Gallagher Senior Vice President, Treasurer
222 W. College Ave. CFO, Treasurer
Appleton, WI 54919 and Director
Robert Roth Senior Vice None
222 W. College Ave. President and
Appleton, WI 54919 Director
James H. Abitz Director None
222 W. College Ave.
Appleton, WI 54919
Woodrow E. Eno Director None
222 W. College Ave.
Appleton, WI 54919
Jerome Laubenstein Director None
4321 N. Ballard Rd.
Appleton, WI 54919
Steven Weber Director None
4321 N. Ballard Rd.
Appleton, WI 54919
Roger Johnson Director None
4321 N. Ballard Rd
Appleton, WI 54919
Anthony De Angelis Vice President None
222 West College Ave.
Appleton, WI 54919
Kenneth E. Podell Assistant None
222 West College Ave. Secretary
Appleton, WI 54919
Paul Stadler Vice President None
222 West College Ave.
Appleton, WI 54919
Lori Richardson Vice President None
222 West College Ave.
Appleton, WI 54919
Jeffrey Verhagen Vice President None
222 West College Ave.
Appleton, WI 54919
Charles D. Gariboldi, Jr. Assistant Vice President Assistant Treasurer
222 West College Ave.
Appleton, WI 54919
Charles Friedman Assistant Vice President None
222 West College Ave.
Appleton, WI 5491 9
Joseph Wreschnig Assistant Vice President Assistant Secretary
222 West College Ave. and Assistant Secretary
Appleton, WI 54919
Wendy Schmidt Assistant Vice President None
222 West College Ave.
Appleton, WI 54919
Cindy Haas Assistant Vice President None
222 West College Ave.
Appleton, WI 54919
</TABLE>
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of The Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of the Registrant and Registrant's
Custodian as follows: all documents required to be maintained by Rule 31a-1(b)
will be maintained by Registrant, except that records required to be maintained
by paragraph (2)(iv) of Rule 31a-1(b) will be maintained by the Custodian.
Item 31. Management Services
Not applicable
Item 32. Undertakings
1. The Registrant undertakes that, at the request of the
shareholders holding 10% or more of the outstanding shares of the
Registrant, the Registrant will hold a special meeting for the purpose of
considering the removal of a trustee from office, and the Registrant will
cooperate with and assist shareholders of record who notify the Registrant
that they wish to communicate with the other shareholders for the purpose
of obtaining signatures to request such a meeting, all pursuant to and in
accordance with Section 16(c) of the Investment Company Act, as amended.
2. Registrant undertakes to furnish a copy of the Registrant's latest
annual report to shareholders, upon request and without charge, to each
person to whom a prospectus is delivered.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this filing meets
the requirements of Rule 485(b) under the Securities Act of 1933 and that it has
duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Appleton and
State of Wisconsin, on the 1st day of June, 1998.
THE AAL MUTUAL FUNDS
- ---------------------------------------------------
Ronald G. Anderson, President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/s/ John H. Pender* Trustee June 1, 1998
- -----------------------------
John H. Pender
/s/ John O. Gilbert Trustee June 1, 1998
- -----------------------------
John O. Gilbert
/s/ Richard L. Gady* Trustee June 1, 1998
- -----------------------------
Richard L. Gady
/s/ D. W. Russler* Trustee June 1, 1998
- -----------------------------
D. W. Russler
/s/ Lawrence M. Woods* Trustee June 1, 1998
- -----------------------------
Lawrence M. Woods
/s/ F. Gregory Campbell* Trustee June 1, 1998
- -----------------------------
F. Gregory Campbell
Principal June 1, 1998
- ----------------------------- Financial and
Terrance P. Gallagher Accounting Officer
Trustee and June 1, 1998
- ----------------------------- President
Ronald G. Anderson, Trustee
*Pursuant to Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson or John O. Gilbert to act as attorney-in-fact and
agent, with full power of substitution and re-substitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
or all amendments) to the Registration Statement on Form N-1A of The AAL Mutual
Funds, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ John H. Pender
- ---------------------
John H. Pender
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson or John O. Gilbert to act as attorney-in-fact and
agent, with full power of substitution and re-substitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
or all amendments) to the Registration Statement on Form N-1A of The AAL Mutual
Funds, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ D. W. Russler
- ---------------------
D. W. Russler
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson or John O. Gilbert to act as attorney-in-fact and
agent, with full power of substitution and re-substitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
or all amendments) to the Registration Statement on Form N-1A of The AAL Mutual
Funds, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ F. Gregory Campbell
- ---------------------
F. Gregory Campbell
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson or John O. Gilbert to act as attorney-in-fact and
agent, with full power of substitution and re-substitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
or all amendments) to the Registration Statement on Form N-1A of The AAL Mutual
Funds, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ Richard L. Gady
- ---------------------
Richard L. Gady
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson or John O. Gilbert to act as attorney-in-fact and
agent, with full power of substitution and re-substitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
or all amendments) to the Registration Statement on Form N-1A of The AAL Mutual
Funds, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ Lawrence M. Woods
- ---------------------
Lawrence M. Woods
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes John O. Gilbert to act as attorney-in-fact and agent, with full power
of substitution and re-substitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any or all amendments) to
the Registration Statement on Form N-1A of The AAL Mutual Funds, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done for all intents and purposes as such
person might or could do in person, hereby ratifying and confirming that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
/s/ Ronald G. Anderson
- ---------------------
Ronald G. Anderson
as Trustee, but not
individually
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT that the person whose signature appears below
authorizes Ronald G. Anderson to act as attorney-in-fact and agent, with full
power of substitution and re-substitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any or all amendments)
to the Registration Statement on Form N-1A of The AAL Mutual Funds, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
/s/ John O. Gilbert
- ---------------------
John O. Gilbert
as Trustee, but not
individually
<PAGE>
Exhibit Index
Item 24
(b)(1) Declaration of Trust;
(b)(2) By Laws, as Amended;
(b)(4) Share Certificates for The AAL Small Cap Stock, Mid Cap Stock,
International, Capital Growth, Equity Income, Balanced, High Yield Bond,
Municipal Bond, Bond and Money Market Funds;
(b)(5)(a) Investment Advisory Agreement as Amended;
(b)(5)(b) Sub-Advisory Agreement with Societe Generale Asset Management Corp, as
Amended;
(b)(6) Distribution Agreement, as Amended;
(b)(8)(a) First Amended Custodial Contract with Firstar Trust Company, as
Amended;
(b)(8)(b) Global Custody Agreement with Chase Manhattan Bank;
(b)(9)(a) Transfer and Dividend Disbursing Agent Agreement, as Amended;
(b)(9)(b) Administrative Services Agreement, as Amended;
(b)(9)(c) Shareholder Maintenance Agreement, as Amended;
(b)(10) Opinion and Consent of Counsel;
(b)(11) Consent of Independent Auditors;
(b)(14) Salary Reduction and Other Elective Simplified Employee Pension -
Individual Retirement Account Contribution Agreement (IRS Form 5305A-SEP);
SIMPLE Individual Retirement Custodial Account (IRS Form 5305-SA with
customized Article VIII); Roth Individual Retirement Custodial Account (IRS
Form 5305-RA with customized Article IX); Education Individual Retirement
Custodial Account (IRS Form 5305-EA with customized Article XI; Simplified
Employee Pension - Individual Retirment Accounts Contribution Agreement
(IRS Form 5305 SEP); Savings Incentive Match Plan for Employees of Small
Employers (SIMPLE) (IRS Form 5305-SIMPLE with customized Article IV and
Article VI); and Model Defined Contribution Plan and Adopting Agreements;
(b)(15) Amended and Restated Distribution Plan, as Amended;
(b)(16) Schedules for Computations of Performance for The AAL Balanced Fund, A
and B shares;
(b)(18) Amended and Restated Plan pursuant to 18f-3; and
27 Financial Data Schedule.
Exhibit 24(b)(1)
THE AAL MUTUAL FUNDS
DECLARATION OF TRUST
DECLARATION OF TRUST, made March 10, 1987, by and among the individuals
executing this Declaration of Trust as the initial Trustees: WHEREAS, the
Trustees desire to establish a trust fund under the laws of the Commonwealth of
Massachusetts, for the investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed to
the trust fund hereunder shall be held and managed under this Declaration of
Trust IN TRUST as herein set forth below.
FIRST: This Trust shall be known as THE AAL MUTUAL FUNDS
SECOND: Whenever used herein, unless otherwise required by the context or
specifically provided:
1. All terms used in this Declaration of Trust which are defined in the 1940 Act
shall have the meanings given to them in the 1940 Act.
2. The "Trust" refers to THE AAL MUTUAL FUNDS.
3. "Shareholder" means a record owner of Shares of the Trust.
4. The "Trustees" refer to the individual trustees in their capacity as trustees
hereunder of the Trust and their successor or successors for the time being in
office as such trustees.
5. "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares.
6. The "1940 Act" refers to the Investment Company Act of 1940, as amended from
time to time.
7. "Commission" means the Securities and Exchange Commission.
8. "Board" or "Board of Trustees" means the Board of Trustees of the Trust.
9. In this Declaration of Trust, the masculine embraces the feminine.
THIRD: The purpose or purposes for which the Trust is formed and the business or
objects to be transacted, carried on and promoted by it are as follows:
1. To hold, invest and reinvest its funds, and in connection therewith to hold
part or all of its funds in cash, and to purchase or otherwise acquire, hold for
investment or otherwise, sell, sell short, assign, negotiate, transfer, exchange
or otherwise dispose of or turn to account or realize upon, securities (which
term "securities" shall for the purposes of this Declaration of Trust, without
limitation of the generality thereof, be deemed to include any stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets) created or issued by any issuer
(which term "issuer" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof be deemed to include any persons,
firms, associations, corporations, syndicates, combinations, organizations,
governments, or subdivisions thereof) or in any other financial instruments
whether or not considered as securities or commodities; and to exercise, as
owner or holder of any securities or other financial instruments, all rights,
powers and privileges in respect thereof; and to do any and all acts and things
for the preservation, protection, improvement and enhancement in value of any or
all such securities.
2. To borrow money and pledge assets in connection with any of the objects or
purposes of the Trust, and to issue notes or other obligations evidencing such
borrowings, to the extent permitted by the 1940 Act and by the Trust's
fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of consideration
(including without limitation thereto, securities or other financial
instruments) now or hereafter permitted by the laws of the Commonwealth of
Massachusetts and by this Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer, reissue
or cancel (all without the vote or consent of the Shareholders of the Trust) its
Shares, in any manner and to the extent now or hereafter permitted by the laws
of Massachusetts and by this Declaration of Trust.
5. To conduct its business in all its branches at one or more offices in
Massachusetts and elsewhere in any part of the world, without restriction or
limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as principal or
agent, and alone or with associates or, to the extent now or hereafter permitted
by the laws of Massachusetts, as a member of, or as the owner or holder of any
stock of, or share of interest in, any issuer, and in connection therewith to
make or enter into such deeds or contracts with any issuers and to do such acts
and things and to exercise such powers, as a natural person could lawfully make,
enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and all
such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the accomplishment, carrying out or attainment of
all or any of the foregoing purposes or objects. The foregoing objects and
purposes shall, except as otherwise expressly provided, be in no way limited or
restricted by reference to, or inference from, the terms of any other clause of
this or any other Articles of this Declaration of Trust, and shall each be
regarded as independent and construed as powers as well as objects and purposes,
and the enumeration of specific purposes, objects and powers shall not be
construed to limit or restrict in any manner the meaning of general terms or the
general powers of the Trust now or hereafter conferred by the laws of the
Commonwealth of Massachusetts nor shall the expression of one thing be deemed to
exclude another, though it be of like nature, not expressed; provided, however,
that the Trust shall not carry on any business, or exercise any powers, in any
state, territory, district or country except to the extent that the same may
lawfully be carried on or exercised under the laws thereof.
FOURTH: The beneficial interest in the Trust shall at all times be divided into
an unlimited number of transferable Shares, par value $.O1 each, each of which
shall represent an equal proportionate interest in the Trust with each other
Share outstanding, none having priority or preference over another. The Trustees
may from time to time divide or combine the Shares into a greater or lesser
number without thereby changing the proportionate beneficial interests in the
Trust. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares and/or 1/1,000ths of a Share or multiple thereof. The
Board of Trustees of the Trust may classify unissued Shares into one or more
additional classes which shall, together with the issued Shares of beneficial
interest of the Trust, have such designations as the Board shall determine, and
which shall be treated for all purposes other than as to dividends as if all
Shares were Shares of one class. The dividends payable to the holders of each
such class shall, subject to any applicable rule, regulation or order of the
Commission or other applicable law or regulation, be determined by the Board and
need not be individually declared but may be declared and paid in accordance
with a formula adopted by the Board. The Board of Trustees of the Trust may in
the alternative classify unissued Shares into one or more additional classes
which shall, together with the issued Shares of beneficial interest of the
Trust, have such designations as the Board may determine (but which
shall-include the word "Series") and shall, subject to any applicable rule,
regulation or order of the Commission or other applicable law or regulation,
have the characteristics set forth in 1. through and including 7. below.
1. All consideration received by the Trust for the issue or sale of Shares of
each such class, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to the class
of Shares with respect to which such assets, payments, or funds were received by
the Trust for all purposes, subject only to the rights of creditors, and shall
be so handled upon the books of account of the Trust. Such assets, income,
earnings, profits and proceeds thereof, any asset derived from any reinvestment
of such proceeds, in whatever form the same may be, are herein referred to as
"assets belonging to" such class.
2. Dividends or distributions on Shares of any such class, whether payable in
Shares or cash, shall be paid only out of earnings, surplus or other assets
belonging to such class.
3. In the event of the liquidation or dissolution of the Trust, Shareholders of
each such class shall be entitled to receive, as a class, out of the assets of
the Trust available for distribution to Shareholders, but other than general
assets not belonging to any particular class, the assets belonging to such
class; and the assets so distributable to the Shareholders of any such class
shall be distributed among such Shareholders in proportion to the number of
shares of such class held by them and recorded on the books of the Trust. In the
event that there are any general assets not belonging to any particular class of
Shares and available for distribution, such distribution shall be made to the
holders of Shares of all classes in proportion to the asset value of the
respective classes.
4. The assets belonging to any such class of Shares shall be charged with the
liabilities in respect to such class and shall be charged with their share of
the general liabilities of the Trust, in proportion to the asset value of the
respective classes. The determination of the Board of Trustees shall be
conclusive as to the amount of liabilities, including accrued expenses and
reserves, and as to the allocation of the same as to a given class, and as to
whether the same, or general assets of the Trust, are allocable to one or more
classes. The liabilities so allocated to a class are herein referred to as
"liabilities belonging to" such class.
5. At all meetings of Shareholders, each shareholder of each Share of each such
class of the Trust shall be entitled to one vote for each Share, irrespective of
the class, standing in his name on the books of the Trust, except that where a
vote of the holders of the Shares of any class, or of more than one class,
voting by class, is required by the 1940 Act and/or Massachusetts law as to any
proposal, only the holders of such class or classes, voting by class, shall be
entitled to vote upon such proposal and the holders of any other class or
classes shall not be entitled to vote thereon. Any fractional Share, if any such
fractional Shares are outstanding, shall carry proportionately all the rights of
a whole Share, including the right to vote and the right to receive dividends.
There shall be no cumulative voting rights with respect to any Shares or class
of Shares of the Trust.
6. The provisions of Article FIFTH relating to voting shall apply when the Trust
has only one class of Shares outstanding or when the Trust has more than one
class of Shares outstanding but which differ only as to their dividend rights.
7. When the Trust has more than one class of Shares outstanding having separate
assets and liabilities: (a) the redemption rights provided to the holders of the
Trust's Shares shall be deemed to apply only to the assets belonging to the
class of Shares in question; and (b) the net asset value per Share computation
as provided for in Article SEVENTH shall be applied as if each such class of
Shares were the Trust as referred to in such computation, but with its assets
limited to the assets belonging to such class and its liabilities limited to the
liabilities belonging to such class.
8. The ownership of Shares shall be recorded in the books of the Trust or a
transfer agent. The Trustees may make such rules as they consider appropriate
for the transfer of Shares and similar matters. The record books of the Trust or
any transfer agent, as the case may be, shall be conclusive as to who are the
holders of Shares and as to the number of Shares held from time to time by each.
9. The Trustees shall accept investments in the Trust from such persons and on
such terms as they may from time to time authorize.
10. Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust or the Trustees.
FIFTH: The following provisions are hereby adopted with respect to voting Shares
of the Trust and certain other rights:
1. The Shareholders shall have power to vote (a) for the election of Trustees to
the extent provided in the By-Laws, (b)with respect to the amendment of this
Declaration of Trust, (c)to the same extent as the shareholders of a
Massachusetts business corporation, as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, and (d) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act or
authorized by law, by this Declaration of Trust, or the By-Laws of the Trust or
any registration statement of the Trust with the Commission or any State, or as
the Trustees may consider desirable.
2. At all meetings of Shareholders each Shareholder shall be entitled to one
vote for each Share standing in his name on the books of the Trust on the date,
f ixed in accordance with the By-Laws, for determination of Shareholders
entitled to vote at such meeting except (if so determined by the Board of
Trustees) for Shares redeemed prior to the meeting. Any fractional Share shall
carry proportionately all the rights of a whole Share, including the right to
vote and the right to receive dividends. The presence in person or by proxy of
the holders of one-third of the Shares outstanding and entitled to vote thereat
shall constitute a quorum at any meeting of the Shareholders. If at any meeting
of the Shareholders there shall be less than a quorum present, the Shareholders
present at such meeting may, without further notice, adjourn the same from time
to time until a quorum shall attend, but no business shall be transacted at any
such adjourned meeting except such as might have been lawfully transacted had
the meeting not been adjourned.
3. Each Shareholder, upon request to the Trust in proper form determined by the
Trust, shall be entitled to require the Trust to redeem all or any part of the
Shares standing in the name of the Shareholder. The method of computing such net
asset value, the time at which such net asset value shall be computed and the
time within which the Trust shall make payment therefore, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration of Trust.
Notwithstanding the foregoing, the Trustees, when permitted or required to do so
by the 1940 Act, may suspend the right of the Shareholders to require the Trust
to redeem Shares.
4. No Shareholder shall, as such holder, have any right to purchase or subscribe
for any security of the Trust which it may issue or sell, other than such right,
if any, as the Trustees, in their discretion, may determine.
5. Notwithstanding anything elsewhere contained in this Declaration of Trust or
in the By-Laws of the Trust, so long as the By-Laws of the Trust do not provide
for regular annual meetings of Shareholders of the Trust, the Shareholders of
the Trust shall have such rights, and the Trust, the Board of Trustees, and the
Trustees shall have such obligations as would exist if the Trust were a common
law trust covered by Section 16(c) of the 1940 Act. In the event that the Trust
has outstanding two or more classes ot Shares which are, pursuant to Article
FOURTH of this Declaration of Trust, required to have the words "Series" as part
of their designation, each such class shall be considered as if it were a
separate common law trust covered by said Section 16(c). However, the Trust may
at any time or from time to time apply to the Commission for one or more
exemptions from all or part of said Section 16(c) and, if an exemptive order or
orders are issued by the Commission, such order or orders shall be deemed part
of said Section 16(c) for the purposes of this paragraph 5.
SIXTH: The persons who shall act as initial Trustees are the persons initially
executing this Declaration of Trust or any counterpart thereof. However, the
By-Laws of the Trust may fix the number of Trustees at a number greater than
that of the number of initial Trustees and may authorize the Trustees to
increase or decrease the number of Trustees, to fill the vacancies created by
any such increase in the number of Trustees, to set and alter the terms of
office of the Trustees and to lengthen or lessen their own terms or make their
terms of indefinite duration, all subject to the 1940 Act. Unless otherwise
provided by the By-Laws of the Trust, the Trustees need not be Shareholders.
SEVENTH:The following provisions are hereby adopted for the purpose of defining,
limiting and regulating the powers of the Trust and of the Trustees and
Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the Trustees
and shall have accepted this trust, the Trust estate shall vest in the new
Trustee or Trustees, together with the continuing Trustees without any further
act or conveyance, and he shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity of
the Trustees, or any one of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust.
3. The assets of the Trust shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the assets of the Trust shall at all
times be considered as vested in the Trustees. Except as provided in this
Declaration of Trust, no Shareholder shall have, as such holder of beneficial
interest in the Trust, any authority, power or right whatsoever to transact
business for or on behalf of the Trust, or on behalf of the Trustees, in
connection with the property or assets of the Trust, or in any part thereof,
except the rights to receive the income and distributable amounts arising
therefrom as set forth herein.
4. The Trustees in all instances shall act as principals, and are and shall be
free from the control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust. Subject to any applicable limitation in
this Declaration of Trust or in the By-Laws of the Trust, the Trustees shall
have power and authority: (a)to adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business of the Trust and
to amend and repeal them to the extent that they do not reserve that right to
the Shareholders; (b)to elect and remove such officers and appoint and terminate
such officers as they consider appropriate with or without cause; (c)to employ a
bank or trust company as custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the By-Laws; (d)to
retain a transfer agent and Shareholder servicing agent, or both; (e)to provide
for the distribution of Shares either through a principal underwriter or the
Trust itself or both; (f)to set record dates in the manner provided for in the
By-Laws of the Trust. (g)to delegate such authority as they consider desirable
to any officers of the Trust and to any agent, custodian or underwriter; (h)to
vote or give assent, or exercise any rights of ownership, with respect to stock
or other securities or property held in Trust hereunder; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper; (i)to
exercise powers and rights of subscription or otherwise which in any manner
arise out of ownership of securities held in trust hereunder; (j)to hold any
security or property in a form not indicating any trust, whether in bearer,
unregistered or other negotiable form; or either in its own name or in the name
of a custodian or a nominee or nominees, subject in either case to proper
safeguards according to the usual practice of Massachusetts business trusts or
investment companies; (k)to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust; (l)to
compromise, arbitrate, or otherwise adjust claims in favor of or against the
Trust or any matter in controversy including, but not limited to, claims for
taxes; (m)to make, in the manner provided in the By-Laws, distributions of
income and of capital gains to Shareholders; (n)to borrow money to the extent
and in the manner permitted by the 1940 Act and the Trust's fundamental policy
thereunder as to borrowing; and (o)to enter into investment advisory or
management contracts, subject to the 1940 Act, with any one or more
corporations, partnerships, trusts, associations or other persons; if the other
party or parties to any such contract are authorized to enter into securities
transactions on behalf of the Trust, such transactions shall be deemed to have
been authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred by the Trustees or upon their
order.
6. (a) The Trustees shall have no power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Every note, bond,
contract or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust shall include a recitation limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such a recitation shall not operate to bind any Shareholder). (b)Except as
otherwise provided in this Declaration of Trust or the By-Laws, whenever this
Declaration of Trust calls for or permits any action to be taken by the Trustees
hereunder, such action shall mean that taken by the Board of Trustees by vote of
the majority of a quorum of Trustees as set forth from time to time in the
By-Laws of the Trust or as required pursuant to the provisions of the 1940 Act
and the rules and regulations promulgated thereunder. (c)The Trustees shall
possess and exercise any and all such additional powers as are reasonably
implied from the powers herein contained such as may be necessary or convenient
in the conduct of any business or enterprise of the Trust, to do and perform
anything necessary, suitable, or proper for the accomplishment of any of the
purposes, or the attainment ot any one or more of the objects, herein
enumerated, or which shall at any time appear conducive to or expedient for the
protection or benefit of the Trust, and to do and perform all other acts or
things necessary or incidental to the purposes herein before set forth, or that
may be deemed necessary by the Trustees. (d)The Trustees shall have the power to
determine conclusively whether any moneys, securities, or other properties of
the Trust property are, for the purposes of this Trust, to be considered as
capital or income and in what manner any expenses or disbursements are to be
borne as between capital and income whether or not in the absence of this
provision such moneys, securities, or other properties would be regarded as
capital or income and whether or not in the absence of this provision such
expenses or disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and prescribe
the tenure of office of the several classes, but no class shall be elected for a
period shorter than that from the time of the election following the division
into classes until the next meeting of Shareholders.
8. The Shareholders shall have the right to inspect the records, documents,
accounts and books of the Trust, subject to reasonable regulations of the
Trustees, not contrary to Massachusetts law, as to whether and to what extent,
and at what times and places, and under what conditions and regulations, such
right shall be exercised.
9. Any Trustee, or any officer elected or appointed by the Trustees or by any
committee of the Trustees or by the Shareholders or otherwise, may be removed at
any time, with or without cause, in such lawful manner as may be provided in the
By-Laws of the Trust.
10. If the By-Laws so provide, the Trustees shall have power to hold their
meetings, to have an office or offices and, subject to the provisions of the
laws of Massachusetts, to keep the books of the Trust outside of said
Commonwealth at such places as may from time to time.be designated by them.
11. Securities held by the Trust shall be voted in person or by proxy by the
President or a vice- President, or such officer or officers of the Trust as the
Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or
employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, director, trustee, employee or
stockholder, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the Trust, and in the absence of fraud no
contract or other transaction shall be thereby affected or invalidated; provided
that in case a Trustee, or a partnership, corporation or association of which a
Trustee is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees or a majority thereof; and any Trustee who is so interested, or who is
also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Trustees which shall authorize any such contract or transaction,
and may vote thereat to authorize any such contract or transaction, with like
force and effect as if he were not such director, officer, trustee, employee or
stockholder of such other trust or corporation or association or a member of a
partnership so interested. (b)Specifically, but without limitation of the
foregoing, the Trust may enter into a management or investment advisory contract
or underwriting contract and other contracts with, and may otherwise do business
with any manager or investment adviser and/or any sub-adviser for the Trust
and/or principal underwriter of the Shares of the Trust or any subsidiary or
affiliate of any such manager or investment adviser and/or sub-adviser and/or
principal underwriter and may permit any such firm or corporation to enter into
any contracts or other arrangements with any other firm or corporation relating
to the Trust notwithstanding that the Board of the Trust may be composed in part
of partners, directors, officers or employees of any such firm or corporations,
and officers of the Trust may have been or may be or become partners, directors,
officers or employees of any such firm or corporation, and in the absence of
fraud the Trust and any such firm or corporation may deal freely with each
other, and no such contract or transaction between the Trust and any such firm
or corporation shall be invalidated or in any way affected thereby, nor shall
any Trustee or officer of the Trust be liable to the Trust or to any Shareholder
or creditor thereof or to any other person for any loss incurred by it or him
solely because of the existence of any such contract or transaction; provided
that nothing herein shall protect any Trustee or officer of the Trust against
any liability to the Trust or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. (c) (1) As used in this paragraph the following terms shall have the
meanings set forth below: (i)the term "indemnitee" shall mean any present or
former Trustee, officer or employee of the Trust, any present or former Trustee
or officer of another trust or corporation whose securities are or were owned by
the Trust or of which the Trust is or was a creditor and who served or serves in
such capacity at the request of the Trust, any present or former investment
adviser, sub-adviser or principal underwriter of the Trust and the heirs,
executors, administrators, successors and assigns of any of the foregoing;
however, whenever conduct by an indemnitee is referred to, the conduct shall be
that of the original indemnitee rather than that of the heir, executor,
administrator, successor or assignee; (ii)the term "covered proceeding" shall
mean any threatened, pending or completed action, suit or proceeding, whether
civil, criminal,administrative or investigative, to which an indemnitee is or
was a party or is threatened to be made a party by reason of the fact or facts
under which he or it is an indemnitee as defined above; (iii)the term "disabling
conduct" shall mean willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office in question;
(iv)the term "covered expenses" shall mean expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by an indemnitee in connection with a covered proceeding; and (v)the term
"adjudication of liability" shall mean, as to any covered proceeding and as to
any indemnitee, an adverse determination as to the indemnitee whether by
judgment, order, settlement, conviction or upon a plea of nolo contenders or its
equivalent. (2)The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct. (3)Except as set forth in (2) above, the Trust shall indemnify any
indemnitee for covered expenses in any covered proceeding, whether or not there
is an adjudication of liability as to such indemnitee, if a determination has
been made that the indemnitee was not liable by reason of disabling conduct by
(i) a final decision of the court or other body before which the covered
proceeding was brought; or (ii) in the absence of such decision, a reasonable
determination, based on a review of the facts, by either (a) the vote of a
majority of a quorum of Trustees who are neither "interested persons", as
defined in the 1940 Act nor parties to the covered proceeding or (b) an
independent legal counsel in a written opinion; provided that such Trustees or
counsel, in reaching such determination, may but need not presume the absence of
disabling conduct on the part of the indemnitee by reason of the manner in which
the covered proceeding was terminated. (4)Covered expenses incurred by an
indemnitee in connection with a covered proceeding shall be advanced by the
Trust to an indemnitee prior to the final disposition of a covered proceeding
upon the request of the indemnitee for such advance and the undertaking by or on
behalf of the indemnitee to repay the advance unless it is ultimately determined
that the indemnitee is entitled to indemnification thereunder, but only if one
or more of the following is the case: (i)the indemnitee shall provide a security
for such undertaking; (ii) the Trust shall be insured against losses arising out
of any lawful advances; or (iii) there shall have been a determination, based on
a review of the readily available facts (as opposed to a full trial- type
inquiry) that there is a reason to believe that the indemnitee ultimately will
be found entitled to indemnification by either independent legal counsel in a
written opinion or by the vote of a majority of a quorum of trustees who are
neither "interested persons" as defined in the 1940 Act nor parties to the
covered proceeding. (5)Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering any or
all indemnitees to the extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by the 1940 Act.
13. For purposes of the computation of net asset value, as in this Declaration
of Trust referred to, the following rules shall apply: (a)The net asset value of
each Share of the Trust tendered to the Trust for redemption shall be determined
as of the close of business on the New York Stock Exchange next succeeding the
tender of such share; (b)The net asset value of each Share of the Trust for the
purpose of the issue of such shares shall be determined as of the close of
business on the New York Stock Exchange next succeeding the receipt of an order
to purchase such shares; (c)The net asset value of each Share of the Trust, as
of the time of valuation on any day, shall be the quotient obtained by dividing
the value, as at such time, of the net assets of the Trust (i.e., the value of
the assets of the Trust less its liabilities exclusive of its surplus) by the
total number of Shares outstanding at such time. The assets and liabilities of
the Trust shall be determined in accordance with generally accepted accounting
principles; provided, however, that in determining the liabilities of the Trust
there shall be included such reserves for taxes or contingent liabilities as may
be authorized or approved by the Trustees, and provided further that in
determining the value of the assets of the Trust for the purpose of obtaining
the net asset value, each security listed on the New York Stock Exchange shall
be valued on the basis of the closing sale at the time of valuation on the
business day as of which such value is being determined; if there be no sale on
such day, then the security shall be valued on the basis of the closing bid
price on such day; if no bid prices are quoted for such day, then the security
shall be valued by such method as the Trustees shall deem in good faith to
reflect its fair market value; securities not listed on the New York Stock
Exchange and other financial instruments shall be valued in like manner on the
basis of quotations on any other stock or commodities exchange which the
Trustees may from time to time approve for that purpose; readily marketable
securities traded in the over-the-counter market shall be valued at the mean
between their closing bid and asked prices, except those quoted by the National
Association of Securities Dealers' NASDAQ System which are valued at the last
sale price, or in the absence of such prices, at the high or inside bid price,
or, if the Trustees shall so determine, at their bid prices; and all other
assets of the Trust and all securities as to which the Trust might be considered
an "underwriter" (as that term is used in the Securities Act of 1933), whether
or not such securities are listed or traded in the over-the-counter market,
shall be valued by such method as they shall deem in good faith to reflect their
fair market value. In connection with the accrual of any fee or refund payable
to or by an investment adviser of the Trust, the amount of which accrual is not
definitely determinable as of any time at which the net asset value of each
Share of the Trust is being determined due to the contingent nature of such fee
or refund, the Trustees are authorized to establish from time to time formulae
for such accrual, on the basis of the contingencies in question to the date of
such determination, or on such other basis as the Trustees may establish. (1)
Shares to be issued shall be deemed to be outstanding as of the time of the
determination of the net asset value per share applicable to such issuance and
the net price thereof shall be deemed to be an asset of the Trust; (2) Shares to
be redeemed by the Trust shall be deemed to be outstanding until the time of the
determination of the net asset value applicable to such redemption and thereupon
and until paid the redemption price thereof shall be deemed to be a liability of
the Trust; and (3) Shares voluntarily purchased or contracted to be purchased by
the Trust pursuant to the provisions of paragraph 13(d) of this Arti cle SEVENTH
shall be deemed to be outstanding until whichever is the later of (i) the time
of the making of such purchase or contract of purchase, and (ii) the time as of
which the purchase price is determined, and thereupon and until paid, the
purchase price thereof shall be deemed to be a liability of the Trust. (d)The
net asset value of each Share of the Trust, as of any time other than the close
of business on the New York Stock Exchange on any day, may be determined by
applying to the net asset value as of the close of business on that Exchange on
the preceding business day, computed as provided in this Article SEVENTH, such
adjustments as are authorized by or pursuant to the direction of the Trustees
and designed reasonably to reflect any material changes in the market value of
securities and other assets held and any other material changes in the assets or
liabilities of the Trust and in the number of its outstanding Shares which shall
have taken place since the close of business on such preceding business day.
(e)In addition to the foregoing, the Trustees are empowered, in their absolute
discretion, to establish other bases or times, or both, for determining the net
asset value of each Share of the Trust in accordance with the 1940 Act and to
authorize the voluntary purchase by the Trust, either directly or through an
agent, of Shares of the Trust upon such terms and conditions and for such
consideration as the Trustees shall deem advisable in accordance with any such
provision, rule or regulation. (f)Payment of the net asset value of Shares of
the Trust properly surrendered to it for redemption shall be made by the Trust
within seven days after tender of such Shares to the Trust for such purpose plus
any period of time during which the right of the holders of the shares of the
Trust to require the Trust to redeem such shares has been suspended. Any such
payment may be made in portfolio securities of the Trust and/or in cash, as the
Trustees shall deem advisable, and no Shareholder shall have a right, other than
as determined by the Trustees, to have his Shares redeemed in kind.
EIGHTH:
1. In case any Shareholder or former Shareholder shall be held to be personally
liable solely by reason of his being or having been a Shareholder and not
because of his acts or omissions or for some other reason, the Shareholder or
former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the Trust estate to be held
harmless from and indemnified against all loss and expense arising from such
liability. This Trust shall, upon request by the Shareholder, assume the defense
of any claim made against any Shareholder for any act or obligation of the Trust
and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership is created
hereby. No Trustee hereunder shall have any power to bind personally either the
Trust's officers or any Shareholder. All persons extending credit to,
contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of their agents,
whether past, present or future, shall be personally liable therefor. Nothing in
this Declaration of Trust shall protect a Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion hereunder in good
faith and with reasonable care under the circumstances then prevailing, shall be
binding upon everyone interested. Subject to the provisions of paragraph 2 of
this Article EIGHTH, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operations of this Declaration of Trust,
and subject to the provisions of paragraph 2 of this Article EIGHTH, shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
4. This Trust shall continue without limitation of time but subject to the
provisions of sub-sections (a), (b) and (c) of this paragraph 4. (a)The
Trustees, with the favorable vote of the holders of more than 50% of the
outstanding Shares entitled to vote may sell and convey the assets of the Trust
(which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees sh -1
distribute the remainin@ proceeds ratably among the holders of the Shares of the
Trust then outstanding. (b)The Trustees, with the favorable vote of the holders
of more than 5b% of the outstanding Shares entitled to vote, may at any time
sell and convert into money all the assets of the Trust. Upon making provision
for the payment of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust, the Trustees shall distribute the remaining
assets of the Trust ratably among the holders of the outstanding Shares. (c)Upon
completion of the distribution of the remaining proceeds or the remaining assets
as provided in sub-sections (a) and (b), the Trust shall terminate and the
Trustees shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties shall be cancelled
and discharged.
5. The original or a copy of this instrument and of each declaration of trust
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each Supplemental
Declaration of Trust shall be filed with the Massachusetts Secretary of State,
as well as any other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such Supplemental Declarations of
Trust have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such Supplemental Declaration of Trust. In this instrument or in any such
Supplemental Declaration of Trust, references to this instrument, and all
expressions like "herein", "hereof" and "hereunder" shall be deemed to refer to
this instrument as amended or affected by any such Supplemental Declaration of
Trust. This instrument may be executed in any number of counterparts, each of
which shall be deemed an original.
6. The trust set forth in this instrument is created under and is to be governed
by and construed and administered according tothe laws of the Commonwealth of
Massachusetts. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the Shares held
in any account if the aggregate net asset value of such Shares (taken at cost or
value, as determined by the Board) has been reduced by a Shareholder to $500 or
less upon such notice to the Shareholders in question, with such permission to
increase the investment in question and upon such other terms and conditions as
may be fixed by the Board of Trustees in accordance with the 1940 Act.
8. In the event that any person advances theorganizational expenses of the
Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
in accordance with criteria fixed by the Board of Trustees, to be amortized over
a period or periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust under any
authorization to take action which is permitted by the 1940 Act, such action
shall be deemed to have been properly taken if such action is in accordance with
the construction of the 1940 Act then in effect as expressed in "no action"
letters of the staff of the Commission or any release, rule, regulation or order
under the 1940 Act or any decision of a court of competent jurisdiction,
notwithstanding that any of the foregoing shall later be found to be invalid or
otherwise reversed or modified by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its ByLaws may be taken by the description thereof in
the then effective prospectus or Statement of Additional Information relating to
the Shares under the Securities Act of 1933 or in any proxy statement of the
Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is permitted
or required to place a value on assets of the Trust, such action may be
delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
12. If authorized by vote of the Trustees and the favorable vote of the holders
of more than 50% of the outstanding Shares entitled to vote, or by any larger
vote which may be required by applicable law in any particular case, the
Trustees shall amend or otherwise supplement this instrument, by making a
Declaration of Trust supplemental hereto, which thereafter shall form a part
hereof; any such Supplemental Declaration of Trust may be executed by and on
behalf of the Trust and the Trustees by any officer or officers of the Trust.
Notwithstanding the foregoing, the name of the Trust may be changed if
authorized by vote of the Trustees and no vote of, or other action by, the
holders of the outstanding Shares of the Trust is required.
IN WITNESS WHEREOF, the undersigned initial trustees have executed this
instrument this 10th day of March, 1987.
/s/ Rochelle Lamm Wallach
-------------------------------
Rochelle Lamm Wallach
/s/ Robert G. Same
-------------------------------
Robert G. Same
<PAGE>
STATE OF WISCONSIN )
) ss.:
COUNTY OF OUTAGAMIE )
On this 10th day of March, 1987, before me personally appeared Rochelle Lamm
Wallach and Robert G. Same, to me known to be the persons described in and who
executed the foregoing instrument, and acknowledged that they executed the same
as their free act and deed.
/s/ Ruth M. Mueller
-------------------------------
Ruth M. Mueller, Notary Public
My commission expires: 8-6-89
Exhibit 24(b)(2)
THE AAL MUTUAL FUNDS
BY-LAWS
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders (which
term as used herein shall, together with all other terms defined in the
Declaration of Trust, have the same meaning as in the Declaration of Trust)
shall be held at the principal office of the Trust or at such other place as may
from time to time be designated by the Board of Trustees and stated in the
notice of meeting.
Section 2. Calling of Meetings. Meetings of the shareholders for any
purpose or purposes (including the election of Trustees) may be called by the
Chairman of the Board of Trustees, if any, or by the President or by the Board
of Trustees and shall be called by the Secretary upon receipt of the request in
writing signed by Shareholders holding not less than one-third in amount of the
entire number of Shares issued and outstanding and entitled to vote thereat.
Such request shall state the purpose or purposes of the proposed meeting.
Section 3. Notice of Meetings. Not less than ten days' and not more
than ninety days' written or printed notice of every meeting of Shareholders,
stating the time and place thereof (and the general nature of the business
proposed to be transacted at any special or extraordinary meeting), shall be
given to each Shareholder entitled to vote thereat by leaving the same with him
or at his residence or usual place of business or by mailing it, postage prepaid
and addressed to him at his address as it appears upon the books of the Trust.
No notice of the time, place or purpose of any meeting of Shareholders
need be given to any Shareholder who attends in person or by proxy or to any
Shareholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
Section 4. Record Dates. The Board of Trustees may fix, in advance, a
date, not exceeding ninety days and not less than ten days preceding the date of
any meeting of Shareholders, and not exceeding ninety days preceding any
dividend payment date or any date for the allotment of rights, as a record date
for the determination of the Shareholders entitled to receive such dividends or
rights, as the case may be; and only Shareholders of record on such date shall
be entitled to notice of and to vote at such meeting or to receive such
dividends or rights, as the case may be.
Section 5. Quorum, Adjournment of Meetings. The presence in person or
by proxy of the holders of record of one third of the Shares of the stock of the
Trust issued and outstanding and entitled to vote thereat, shall constitute a
quorum at all meetings of the Shareholders. If at any meeting of the
Shareholders there shall be less than a quorum present, the Shareholders present
at such meeting may, without further notice, adjourn the same from time to time
until a quorum shall attend, but no business shall be transacted at any such
adjourned meeting except such as might have been lawfully transacted had the
meeting not been adjourned.
Section 6. Voting and Inspectors. At all meetings of Shareholders every
Shareholder of record entitled to vote thereat shall be entitled to vote at such
meeting either in person, by proxy appointed by instrument in writing subscribed
by such Shareholder or his duly authorized attorney-in-fact or by proxy
appointed by the Shareholder via telephonic or other electronic means according
to supplemental voting procedures that the officers of the Trust in their
discretion deem appropriate, provided any such procedures include provisions
deemed sufficient by the officers to (1) verify the accuracy of proxies
transmitted by telephone or other electronic means; (2) provide the Shareholder
an opportunity to validate an electronic vote; (3) develop and maintain
accurate, permanent voting records, including the date the Trust received voting
instructions and the name of the recipient; and (4) assure compliance with all
applicable laws, as in effect from time to time. (As amended May 28, 1997)
All elections of Trustees shall be had by a plurality of the votes cast
and all questions shall be decided by a majority of the votes cast, in each case
at a duly constituted meeting, except as otherwise provided in the Declaration
of Trust or in these By-Laws or by specific statutory provision superseding the
restrictions and limitations contained in the Declaration of Trust or in these
By-Laws.
At any election of Trustees, the Board of Trustees prior thereto may,
or, if they have not so acted, the Chairman of the meeting, may, and upon the
request of the holders of ten percent (10%) of the Shares entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath of affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Trustee shall be appointed such
inspector.
The chairman of the meeting may cause a vote by ballot to be taken upon
any election or matter, and such vote shall be taken upon the request of the
holders of ten percent (10%) of the Shares entitled to vote on such election or
matter.
Section 7. Conduct of Shareholders' Meetings. The meetings of the
Shareholders shall be presided over by the Chairman of the Board of Trustees, if
any, or if he shall not be present, by the President, or if he shall not be
present, by a Vice President, or if neither the Chairman of the Board of
Trustees, the President nor any Vice President is present, by a chairman to be
elected at the meeting. The Secretary of the Trust, if present, shall act as
Secretary of such meetings, or if he is not present, and Assistant Secretary is
present, then the meeting shall elect its secretary.
Section 8. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Shareholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies, and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed as provided in Section 6, in
which event such inspectors of election shall decide all such questions.
<PAGE>
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and property of
the Trust shall be conducted and managed by a Board of Trustees consisting of a
number of initial Trustees, which number may be increased or decreased as
provided in Section 2 of this Article. The Board of Trustees may set and alter
the terms of office of the Trustees, may lengthen or lessen their own terms or
make their terms of indefinite duration, all subject of the 1940 Act; provided
that no Trustee shall serve in office beyond December 31 of the year in which
such Trustee attains the age of 70. Trustees need not be shareholders. (As
amended August 21, 1990)
Section 2. Increase or Decrease in Number of Trustees; Removal. The
Board of Trustees may increase the number of Trustees to a number not exceeding
fifteen, and may elect Trustees to fill the vacancies created by any such
increase in the number of Trustees; the Board of Trustees may likewise decrease
the number of Trustees to a number not less than three. Vacancies occurring
other than by reason of any such increase shall be filled as provided for a
Massachusetts business corporation. In the event that after proxy material has
been printed for a meeting of Shareholders at which Trustees are to be elected
any one of more management nominees dies or becomes incapacitated, the
authorized number of Trustees shall be automatically reduced by the number of
such nominees, unless the Board of Trustees prior to the meeting shall otherwise
determine. Any Trustee at any time may be removed either with or without cause
by resolution duly adopted by the affirmative votes of the holders of the
majority of the Shares of the Trust present in person or by proxy at any meeting
of Shareholders at which such vote may be taken, provided that a quorum is
present, or by such larger vote as may be required by Massachusetts law. Any
Trustee at any time may be removed for cause by resolution duly adopted at any
meeting of the Board of Trustees provided that notice thereof is contained in
the notice of such meeting and that such resolution is adopted by the vote of at
least two thirds of the Trustees whose removal is not proposed. As used herein,
"for cause" shall mean any cause which under Massachusetts law would permit the
removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their meetings, have
one or more offices, and keep the books of the Trust outside Massachusetts, at
any office or offices of the Trust or at any other place as they may from time
to time by resolution determine, or, in the case of meetings, as they may from
time to time by resolution determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board of Trustees
shall be held at such time and on such notice, if any, as the Trustees may from
time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Trustees
may be held from time to time upon call of the Chairman of the Board of
Trustees, if any, the President or two or more of the Trustees, by oral or
telegraphic or written notice duly served on or sent or mailed to each Trustee
not less than one day before such meeting. No notice need be given to any
Trustee who attends in person or to any Trustee who, in writing executed and
filed with the records of the meeting either before or after the holding
thereof, waives such notice. Such notice or waiver of notice need not state the
purpose or purposes of such meeting.
Section 6. Quorum. One-third of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Trustees. If at any meeting of the Board there
shall be less than a quorum present (in person or by open telephone line, to the
extent permitted by the 1940 Act), a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained. The act of
the majority of the Trustees present at any meeting at which there is a quorum
shall be the act of the Board, except as may be otherwise specifically provided
by statute, by the Declaration of Trust or by these By-Laws.
Section 7. Executive Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, elect from the Trustees an
Executive Committee to consist of such number of Trustees as the Board may from
time to time determine. The Board of Trustees by such affirmative vote shall
have power at any time to change the members of such Committee and may fill
vacancies in the Committee by election from the Trustees. When the Board of
Trustees is not in session, the Executive Committee shall have and may exercise
any or all of the powers of the Board of Trustees in the management of the
business and affairs of the Trust (Including the power to authorize the seal of
the Trust to be affixed to all papers which may require it) except as provided
by law and except the power to increase or decrease the size of, or fill
vacancies on the Board. The Executive Committee may fix its own rules of
procedure and may meet, when and as provided by such rules or by resolution of
the Board of Trustees, but in every case the presence of a majority shall be
necessary to constitute a quorum. In the absence of any member of the Executive
Committee the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Trustees to act in the
place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the affirmative
vote of a majority of the entire Board, may appoint other committees which shall
in each case consist of such number of members (not less than two) and shall
have and may exercise such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee may determine
its action, and fix the time and place of its meetings, unless the Board of
Trustees shall otherwise provide. The Board of Trustees shall have power at any
time to change the members and powers of any such committee, to fill vacancies,
and to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of Trustees and
Committees. Any action required or permitted to be taken at any meeting of the
Board of Trustees or any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all members of the Board, or of such
committee, as the case may be. Trustees or members of a committee of the Board
of Trustees may participate in a meeting by means of a conference telephone or
similar communications equipment; such participation shall, except as otherwise
required by the 1940 Act, have the same effect as presence in person.
Section 10. Compensation of Trustees. Trustees shall be entitled to
receive such compensation from the Trust for their services as may from time to
time be voted by the Board of Trustees.
Section 11. Dividends. Dividends or distributions payable on the Shares
may, but need not be, declared by specific resolution of the Board as to each
dividend or distribution; in lieu of such specific resolutions, the Board may,
by general resolution, determine the method of computation thereof, the method
of determining the Shareholders to which they are payable and the methods of
determining whether and to which Shareholders they are to be paid in cash or in
additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Trust
shall be chosen by the Board of Trustees, and shall include a President, one or
more Vice-Presidents (the number thereof to be determined by the Board of
Trustees), a Secretary and a Treasurer. The Chairman of the Board of Trustees,
if any, shall be selected from among the Trustees. The Board of Trustees may
also in its discretion appoint Assistant Secretaries, Assistant Treasurers, and
other officers, agents and employees, who shall have such authority and perform
such duties as the Board or the Executive Committee may determine. The Board of
Trustees may fill any vacancy which may occur in any office. Any two offices,
except those of President and Vice-President, may be held by the same person,
but no officer shall execute, knowledge or verify any instrument in more than
one capacity, if such instruments is required by law or these By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
as fixed by the Board of Trustees; however, any officer may be removed from
office at any time with or without cause by the vote of a majority of the entire
Board of Trustees.
Section 3. Powers and Duties. The officers of the Trust shall have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as may from time to time be conferred by the Board of
Trustees or the Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificates of Shares. Each Shareholder of the Trust may be
issued a certificate or certificates for his Shares in such form as the Board of
Trustees may from time to time prescribe, but only if and to the extent and on
the conditions prescribed by the Board.
Section 2. Transfer of Shares. Shares shall be transferable on the
books of the Trust by the holder thereof in person or by his duly authorized
attorney or legal representative, upon surrender and cancellation of
certificates, if any, for the same number of Shares, duly endorsed or
accompanied by proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Trust or its agent may reasonably
require; in the case of shares not represented by certificates, the same or
similar requirements may be imposed by the Board of Trustees.
Section 3. Stock Ledgers. The stock ledgers of the Trust, containing
the name and address of the Shareholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Trust, or if the
Trust employs a transfer agent, at the offices of the transfer of the Trust.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Trustees may determine the conditions upon which a new certificate may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in their discretion, require the owner of such certificate
or his legal representative to give bond, with sufficient surety to the Trust
and the transfer agent, if any, to indemnify it and such transfer agent against
any and all loss or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost, stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the Trust, in
such form and bearing such inscriptions as it may determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Trust shall be fixed by the Board of Trustees.
ARTICLE VI
AMENDMENT OF BY-LAWS
The By-Laws of the Trust may be altered, amended, added to or repealed
by the Shareholders or by majority vote of the entire Board of Trustees, but any
such alteration, amendment, addition or repeal of the By-Laws by action of the
Board of Trustees may be altered or repealed by the Shareholders.
24(b)(4)
Specimen Stock Certificates
The AAL Mutual Funds
---------------------
Name of Fund
---------------------
Name of Class
A Massachusetts Business Trust
This certifies that ______________________________________ is the owner of
________ shares of beneficial interest, $.01 par value, of The AAL Mutual Funds,
_____________________________ established as a Trust under the laws of the
(Name of Fund) Commonwealth of Massachusetts by a Declaration
of Trust effective March 13, 1987. The interest represented hereby is
transferable only on the books of the Trust by the holder hereof in person or
by a duly authorized attorney upon surrender of this Certificate to the
Transfer Agent properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent.
IN WITNESS WHEREOF, the said Trust has caused this Certificate to be signed
by its facsimile signatures of its duly authorized officers, and the facsimile
of its Trust Seal.
Dated: ________________________
/s/ Robert G. Same /s/ Ronald G. Anderson
Secretary President
Exhibit 24(b)(5)(a)
THE AAL MUTUAL FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 28th day of November, 1990, by and between THE AAL
MUTUAL FUNDS (the "Trust"), a Massachusetts Business Trust, and AAL ADVISORS
INC. (the "Advisor").
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 between the parties hereto as follows:
1. In General
The Trust hereby appoints the Advisor to act as investment advisor to the
Trust with respect to its series of shares described on Exhibit A attached
hereto. Each series is referred to herein individually as "a Fund" and
collectively as "the Funds." The Advisor agrees, all as more fully set forth
herein, to provide professional investment management with respect to the
investment of the assets of each Fund and to supervise and arrange the purchase
and sale of securities and other assets held in the portfolio of each Fund and
generally administer the affairs of the Trust. The Advisor may engage, on behalf
of the Trust or any Fund, the services of a Sub-Advisor, subject to any
limitations imposed by the Investment Company Act of 1940 (the "Act").
2. Duties and Obligations of the Advisor With Respect to Management of
the Trust
(a) Subject to the succeeding provisions of this section and subject to the
direction and control of the Board of Trustees of the Trust, the Advisor (and
the Sub-Advisor when authorized by the Advisor), as agent and attorney-in-fact
with respect to the Trust, is authorized, in its discretion and without prior
consultation with the Trust to:
(i) Buy, sell, exchange, convert, lend and otherwise trade in any
stocks, bonds and any other securities or assets; and
(ii) Place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Advisor may select.
(b) Any investment purchases or sales made by the Advisor and/or any
Sub-Advisor shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Act and of any rules or
regulations in force thereunder; (2) any other applicable provisions of law; (3)
the provisions of the Declaration of Trust and By-Laws of the Trust as amended
form time to time; (4) any policies and determinations of the Board of Trustees
of the Trust; and (5) the fundamental policies of the Trust, as reflected in its
Registration Statement under the Act, or as amended by the shareholders of the
Trust.
(c) The Advisor shall also administer the affairs of the Trust and, in
connection therewith, shall be responsible for (i) maintaining the Trust's books
and records (other than financial or accounting books and records maintained by
any accounting services agent and such records maintained by the Trust's
custodian or transfer agent); (ii) overseeing the Trust's insurance
relationships; (iii) preparing for the Trust (or assisting counsel and/or
auditors in the preparation of) all required tax returns, proxy statements and
reports to the Trust's shareholders and Trustees and reports to and other
filings with the Securities and Exchange Commission and any other governmental
agency (the Trust agreeing to supply or cause to be supplied to the Advisor all
necessary financial and other information in connection with the foregoing);
(iv) preparing such applications and reports as may be necessary to register or
maintain the Trust's registration and/or the registration of the shares of the
Funds under the securities or "Blue Sky" laws of the various states selected by
the Trust's distributor (a Fund or Funds agreeing to pay all filing fees or
other similar fees in connection therewith); (v) responding to all inquiries or
other communications of shareholders, if any, which are directed to the Advisor,
or if any such inquiry or communication is more properly to be responded to by
the Trust's custodian, transfer agent or accounting services agent, overseeing
their response thereto; (vi) overseeing all relationships between the Trust and
its custodian(s), transfer agent(s) and accounting services agent(s), including
the negotiation of agreements and the supervision of the performance of such
agreements; and (vii) authorizing and directing any of the Advisor's directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected. All services to be
furnished by the Advisor under this Agreement may be furnished through the
medium of any directors, officers or employees of the Advisor.
(d) The Advisor shall give the Trust 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 obligations or duties
("disabling conduct") hereunder on the part of the Advisor (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Advisor) the Advisor shall not be subject
to liability to the Trust or to any shareholder of the Trust 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 of for any
loss suffered by any of them in connection with the matters to which this
Agreement is related, 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
Trust shall indemnify the Advisor (and its officers directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Advisor) from any liability arising from the Advisor's
conduct under the Agreement to the extent permitted by the Declaration of Trust
and applicable law.
(e) Nothing in this Agreement shall prevent the Advisor or any "affiliated
person" (as defined in the Act) of the Advisor from acting as investment advisor
or manager and/or principal underwriter for an other person, firm or corporation
and shall not in any way limit or restrict the Advisor or any such affiliated
person from buying, selling or trading any securities for its or their own
accounts or the accounts of others for whom it or they may be acting, provided,
however, that the Advisor expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
(f) It is agreed that the Advisor shall have no responsibility or liability
for the accuracy or completeness of the Funds' Registration Statement under the
Act or the Securities Act of 1933 except for information supplied by the Advisor
for inclusion therein.
3. Broker-Dealer Relationships
In connection with its duties set forth in Section 2(a) (ii) of this
Agreement to arrange for the purchase and sale of securities and other assets
held by each Fund by placing purchase and sale orders for the Fund, the Advisor
and/or any Sub-Advisor shall select such broker-dealers ("brokers") and shall,
in the Advisor's or Sub-Advisor's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt and efficient execution at the most
favorable net price. In making such selection, the Advisor and/or Sub-Advisor is
authorized to consider the reliability, integrity and financial condition of the
broker. The Advisor and/or Sub-Advisor is also authorized to consider whether
the broker provides brokerage and/or research services to the Trust and/or other
accounts of the Advisor or Sub-Advisor. The commissions paid to such brokers may
be higher than another broker would have charged if a good faith determination
is made by the Advisor and/or Sub-Advisor that the commission is reasonable in
relation to the services provided, viewed in terms of either that particular
transaction or the Advisor's or Sub-Advisor's overall responsibilities as to the
accounts as to which it exercises investment discretion. The Advisor and/or
Sub-Advisor shall use its judgment in determining that the amount of commissions
paid are reasonable in relation to the value of brokerage and research services
provided and need not place or attempt to place a specific dollar value on such
services or on the portion of commission rates reflecting such services. To
demonstrate that such determinations were in good faith, and to show the overall
reasonableness of commissions paid, the Advisor and/or Sub-Advisor shall be
prepared to show that commissions paid (i) were for purposes contemplated by
this Agreement; (ii) provide lawful and appropriate assistance to the Advisor
and/or Sub-Advisor in the performance of its decision-making responsibilities;
and (iii) were within a d reasonable range as compared to the rates charged by
qualified brokers to other institutional investors as such rates may become
known from available information. The Trust recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question. The Advisor and/or Sub-Advisor is also authorized
to consider sales of shares as a factor in the selection of brokers to execute
brokerage and principal transactions, subject to the requirements of "best
execution," as defined above.
4. Allocation of Expenses
The Advisor agrees that it will furnish the Trust, at the Advisor's
expense, with all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Advisor will
also pay all compensation of all Trustees, officers and employees of the Trust
who are affiliated persons of the Advisor. All costs and expenses not expressly
assumed by the Advisor under this Agreement shall be paid by the Trust,
including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Advisor; (v) legal and audit
expenses; (vi) fees and expenses of the Trust's custodian, shareholder servicing
or transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Trust or its
shares; (ix) expenses of preparing, printing and mailing reports and notices,
proxy material and prospectuses to shareholders of the Trust; (x) all other
expenses incidental to holding meetings of the Trust's shareholders; (xi) dues
or assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal obligations
which the Trust may have to indemnify its officers and Trustees with respect
thereto; and (xiii) all expenses which the Trust or a Fund agrees to bear in any
distribution agreement or in any plan adopted by the Trust and/or a Fund
pursuant to Rule 12b-1 under the Act.
<PAGE>
5. Compensation of the Advisor
(a) The Trust agrees to pay the Advisor and the Advisor agrees to accept as
full compensation for all services rendered by the Advisor as such, an annual
management fee, payable monthly and computed on the average daily net asset
value of each Fund as shown on Exhibit A attached hereto.
(b) In the event the expenses of a Fund (including the fees of the Advisor
and amortization of organization expenses, but excluding interest, taxes,
brokerage commissions, extraordinary expenses and sales charges and distribution
fees) for any fiscal year exceed the limits set by applicable regulations of
state securities commissions, the Advisor will reduce its fee by up to the
amount of such excess. Any such reductions are subject to readjustment during
the year. The payment of the management fee at the end of any month will be
reduced or postponed or, if necessary, a refund will be made to a Fund so that
at no time will there be any accrued, but unpaid, liability under this expense
limitation.
6. Duration and Termination
(a) This Agreement shall go into effect for The AAL Capital Growth Fund,
The AAL Income Fund, The AAL Municipal Bond Fund and The AAL Money Market Fund
on the first business day following approval by a vote of a "majority" (as
defined in the Act) of the outstanding voting securities of the Fund, replacing
any prior agreement; and for additional funds initiated after the date of this
Agreement, on such date as specified on Schedule A hereto; 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 Trust'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, 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 Advisor at any time without
penalty upon giving the Trust sixty (60) days' written notice (which may be
waived by the Trust) and may be terminated by the Trust at any time without
penalty upon giving the Advisor sixty (60 days' written notice (which notice may
be waived by the Advisor), provided that such termination by the Trust shall 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 of the outstanding
voting securities of the Trust, or with respect to any Fund by the vote of a
majority of the outstanding voting share of such Fund. This Agreement shall
automatically terminate in the event of its "assignment" (as defined in the
Act).
(c) The Trust hereby agrees that if (i) the Advisor ceases to act as
investment advisor to the Trust and (ii) continued use of the Trust's present
name would create confusion in the context of the Advisor's business or that of
Aid Association for Lutherans or its affiliates, the Trust will use its best
efforts to change its name in order to delete the abbreviation "AAL" from its
name.
7. Agreement Binding Only on Trust Property
The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the advisor represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ John H. Pender
- ----------------------------- -------------------------------
Robert G. Same, Secretary John H. Pender, President
ATTEST: AAL ADVISORS INC.
/s/ Robert G. Same /s/ Rochelle Lamm Wallach
- ----------------------------- -------------------------------
Robert G. Same, Secretary Rochelle Lamm Wallach, President
<PAGE>
EXHIBIT A TO THE AAL MUTUAL FUNDS
INVESTMENT ADVISORY AGREEMENT
1. The AAL Capital Growth Fund (effective December 21, 1990)
The management fee for this Fund, calculated in accordance with paragraph 5
of The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual
rate of 0.75 of 1% on the first $250 million of average daily net assets and
0.65 of 1% on average daily net assets over $250 million.
2. The AAL Income Fund (effective December 21, 1990)
The management fee for this Fund, calculated in accordance with paragraph 5
of The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual
rate of 0.60 of 1% on the first $250 million of average daily net assets and
0.525 of 1% on average daily net assets over $250 million.
3. The AAL Municipal Bond Fund (effective November 28, 1990)
The management fee for this Fund, calculated in accordance with paragraph 5
of The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual
rate of 0.60 of 1% on the first $250 million of average daily net assets and
0.525 of 1% on average daily net assets over $250 million.
4. The AAL Money Market Fund (effective December 21, 1990)
The management fee for this Fund, calculated in accordance with paragraph 5
of The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual
rate of 0.50 of 1% on the first $500 million of average daily net assets and
0.45 of 1% on average daily net assets over $500 million.
<PAGE>
AMENDMENT NO. 9
TO
INVESTMENT ADVISORY AGREEMENT
The Investment Advisory Agreement between The AAL Mutual Funds and AAL Capital
Management Corporation (f/k/a AAL Advisors, Inc.), effective November 28, 1990,
is hereby amended, effective December 29, 1997, as follows:
1. Schedule A attached to the Investment Advisory Agreement is modified to
add The AAL Balanced Fund and a revised fee schedule for The AAL Bond
and Municipal Bond Funds (effective September 1, 1997).
An amended Schedule A, December 29, 1997, is attached hereto.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 29, 1997.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
/s/ Robert G. Same /s/ Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
<PAGE>
EXHIBIT A
AMENDMENT NO. 9
TO
THE AAL MUTUAL FUNDS INVESTMENT ADVISORY AGREEMENT
DATED NOVEMBER 28, 1990
1. The AAL Capital Growth Fund (effective November 1, 1995)
The Management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.70 of 1% on the first $250 million of average daily net assets, 0.65 of 1%
on average daily net assets on the next $250 million of average daily net
assets, 0.575 of 1% on the next $500 million of average daily net assets and
0.50 of 1% on the average daily net assets over $1 billion.
2. The AAL Bond Fund (f/k/a The AAL Income Fund) (effective September 1, 1997)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on the first $250 million of average daily net assets and 0.45 of
1% on average daily net assets over $250 million.
3. The AAL Municipal Bond Fund (effective September 1, 1997)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on the first $250 million of average daily net assets and 0.45 of
1% on average daily net assets over $250 million.
4. The AAL Money Market Fund (effective December 21, 1990)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on the first $500 million of average daily net assets and 0.45 of
1% on average daily net over $500 million.
5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001 (effective
November 13, 1991)
The management fee for this Fund, calculated in accordance with paragraph t of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on average daily net assets.
6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006 (effective
November 13, 1991)
7. The AAL Mid Cap Stock Fund (f/k/a The AAL Small Company Stock Fund )
(effective November 1, 1995)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.75 of 1% on the first $200 million of average daily net assets and 0.65 of
1% on average daily net assets over $200 million.
8. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund) (effective
November 1, 1995)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on the first $250 million and 0.45 of 1% on average daily net
assets over $250 million.
9. The AAL International fund (effective August 1, 1995)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 1% of average daily net assets.
10. The AAL Small Cap Stock Fund (effective July 1, 1996)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.75 of 1% on the first $200 million of average daily net assets and 0.65 of
1% on average daily net assets over $200 million.
11. The AAL High Yield Bond Fund (effective January 8, 1997)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.60 of 1% on average daily net assets.
12. The AAL Balanced Fund (effective December 29, 1997)
The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.60 of 1% on average daily net assets.
EXHIBIT (b)(5)(b)
THE AAL MUTUAL FUNDS
SUB-ADVISORY AGREEMENT
AGREEMENT made this 12th day of July 1995 by and among THE AAL MUTUAL
FUNDS (the "Trust"), a Massachusetts Business Trust, AAL CAPITAL MANAGEMENT
CORPORATION (the "Adviser"), a Delaware corporation and SOCIETE GENERALE ASSET
MANAGEMENT CORP. (the "Sub-Adviser"), a Delaware 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 Trust with respect to the investment and reinvestment of the
assets of the Trust's series of shares described as The AAL International Fund
(the "Fund"). It is understood that the Trust 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 Fund(s) under
the terms to this Agreement.
<PAGE>
2. Duties and Obligations of the Sub-Adviser with Respect to Investment of
Assets of The AAL 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 of the Trust, the Sub-Adviser, as agent and attorney-in-fact with
respect to the Trust, is authorized, in its discretion and within prior
consultation with the Trust to: (i) Buy, sell, exchange, convert, lend and
otherwise trade in any stocks, bonds, 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-Advisers may select; including
brokers and dealers that may be affiliate of the Sub-Adviser, and (iii) 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 Trust and those of AAL Capital Management Corporation (the
"Distributor") under the Distribution Agreement with the Trust. Written
procedures with respect to (i), (ii) and (iii) above may be set forth as agreed
to among the Trust, 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 Declaration of
Trust and By-Laws of the Trust as amended from time to time; (4) any policies
and determinations of the Board of Trustees of the Trust; and (5) the
fundamental policies of the Trust, as reflected in its Registration Statement
under the Act, or as amended by the shareholders of the Trust 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 Trust 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 Trust or
to any shareholder of the Trust 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 Trust 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 Declaration of Trust 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 Trust under this Agreement. It is agreed
that the Sub-Adviser shall have no responsibility or liability for the accuracy
or completeness of the Trust'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 provided or authorized, have no authority to
act or represent the Trust in any way or otherwise be deemed an agent of the
Trust.
(e) In connection with its duties to arrange for the purchase and sale of
the Fund's portfolio 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 Trust 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
Trust such information relating to portfolio transactions as they may reasonably
request.
(f) The Sub-Adviser shall be responsible for 13F reporting for the
securities held by The AAL International Fund.
3. Allocation of Expenses
The Sub-Adviser agrees that it will furnish the Trust, at the Sub-Adviser's
expense, with all office space, facilities, equipment, and clerical personnel
necessary for carrying out its duties under this Agreement. The Sub-Adviser will
pay all compensation of those of the Trust's officers and employees, if any, and
of those Trustees, if any, who is each case are affiliated persons of the
Sub-Adviser.
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 which are prepared or
maintained by the Sub-Adviser on behalf of the Trust are the property of the
Trust and will be surrendered promptly tot he Trust or Adviser on request.
5. Reference to the Sub-Adviser
Neither the Trust, 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 AAL International Fund on
August 1, 1995, 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 Trust'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, 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 Trust and the Adviser sixty (60) days' written notice
(which notice may be waived by the Trust and Adviser) and may be terminated by
the Trust 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 Trust 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 Trust, 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 Trust Property
The Sub-Adviser understands that the obligations of this Agreement are
not binding upon any shareholder of the Trust personally, but bind only the
Trust's property; the Sub-Adviser represents that it has notice of the
provisions of the Trust's Declaration of Trust disclaiming shareholder liability
for acts or obligations of the Trust.
9. Action By Individual Fund
The provisions of this Agreement and any amendments hereto with respect to
a Fund may be approved by the shareholders of that Fund and become effective
with respect to the assets of that Fund without the necessity of approval
thereof by shareholders of any other Fund. The Adviser represents that the
holders of a majority (as defined in the "Act") of the Fund, will approve the
entry into this Agreement on behalf of the Fund.
10. Notices
(a) The Sub-Adviser agrees to promptly notify the Adviser of the occurrence
of any of the following events:
(1) any change in any of the Sub-Adviser's office or portfolio
managers;
(2) the Sub-Advisers 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;
(3) 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 Fund; or
(4) any change in ownership or control of the Sub-Adviser.
(b) 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 dispatch thereof. Addresses for notice may be
changed by written notice to the other party.
<PAGE>
The Adviser
Robert G. Same, Sr. Vice President
AAL CAPITAL MANAGEMENT CORPORATION
222 West College Avenue
Appleton, WI 54919
The Sub-Adviser
Jean-Marie Eveillard, President
SOCIETE GENERALE ASSET MANAGEMENT CORP.
1221 Avenue of the Americas, Eighth Floor
New York, NY 10020
Fax (212) 278-5911
<PAGE>
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.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ John H. Pender
- ----------------------------- -------------------------------
Robert G. Same, Secretary John H. Pender, President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
/s/ Robert G. Same /s/ H. Michael Spence
- ----------------------------- -------------------------------
Robert G. Same, Secretary H. Michael Spence, President
ATTEST: SOCIETE GENERALE ASSET
MANAGEMENT CORP
/s/ Philip J. Bafundo /s/ Jean-Marie Eveillard
- ----------------------------- -------------------------------
Philip J. Bafundo, Secretary Jean-Marie Eveillard, President
<PAGE>
EXHIBIT A
TO
THE AAL MUTUAL FUNDS SUB-ADVISORY AGREEMENT
(Dated August 1, 1995)
1. The AAL International Fund (effective August 1, 1995)
The management fee for this 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:
.75 of 1% of the Fund's average daily net assets
<PAGE>
Amendment No. 1
to
THE AAL MUTUAL FUNDS SUB-ADVISORY AGREEMENT
(Dated July 12, 1995)
The Sub-Advisory Agreement between The AAL Mutual Funds, AAL Capital
Management Corporation (the "Adviser") and Societe Generale Asset Management
Corp. (the "Sub-Adviser"), effective August 1, 1995, is hereby amended,
effective December 1, 1997, as follows:
1. Schedule A attached to the Sub-Advisory Agreement (effective August 1,
1995) is modified to revise the fee schedule for The International
Fund. An amended Schedule A, effective December 1, 1997, is attached
hereto.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 1, 1997.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
/s/ Robert G. Same /s/Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: SOCIETE GENERALE ASSET
MANAGEMENT CORP
/s/ Philip J. Bafundo /s/ Jean-Marie Eveillard
- ----------------------------- -------------------------------
Philip J. Bafundo, Secretary Jean-Marie Eveillard, President
<PAGE>
EXHIBIT A
AMENDMENT NO. 1
TO
THE AAL MUTUAL FUNDS SUB-ADVISORY AGREEMENT
(Dated December 1, 1997)
1. The AAL International Fund (effective December 1, 1997)
The management fee for this 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 :
.55 of 1% of the Fund's average daily net assets.
EXHIBIT 24(b)(6)
Effective April 1, 1991, AAL Distributors Inc. changed its name to AAL Capital
Management Corporation. All references to AAL Distributors Inc. ("Distributor")
are now to AAL Capital Management Corporation.
THE AAL MUTUAL FUNDS
DISTRIBUTION AGREEMENT
This Agreement, made as of the 15th day of June, 1987, between THE AAL MUTUAL
FUNDS, a Massachusetts business trust (the "Trust"), and AAL DISTRIBUTORS INC.,
a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust proposes to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act") and it is in the interest of the Trust to
offer its classes of shares entitled the Capital Growth Series ("Capital Growth
Fund"), the Income Series ("Income Fund") and the Municipal Bond Series
("Municipal Bond Fund") (individually a "Fund" and collectively the "Funds") for
sale continuously; and
WHEREAS, the Distributor is registered as a broker-deal under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with each
other with respect to the continuous offering of the shares of beneficial
interest of all series of shares of the Trust "the "Shares"), to commence after
the effectiveness of its initial registration statement filed pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act.
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor
The Trust hereby appoints the Distributor as its exclusive agent to
sell and to arrange for the sale of the Shares, on the terms and for
the period set forth in this Agreement, and the Distributor hereby
accepts such appointment and agrees to act hereunder directly and/or
through the Trust's transfer agent in the manner set forth in the
prospectus (as defined below). It is understood and agreed that the
services of the Distributor hereunder are not exclusive, and the
Distributor may act as principal underwriter for the shares of any
other registered investment company. It is also understood that
purchases of shares may be made directly through the Funds' Transfer
Agent in the manner set forth in the prospectus.
2. Services and Duties of the Distributor
(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms
described in the Trust's prospectus. As used in this Agreement, the
term "prospectus" shall mean the prospectus and statement of
additional information included as part of the Trust's Registration
Statement, as such prospectus and statement of additional information
may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement most
recently filed from time to time by the Trust with the Securities and
Exchange Commission and effective under the 1933 Act and the 1940 Act,
as such Registration Statement is amended by any amendments thereto at
the time in effect. The Distributor shall not be obligated to sell any
certain number of Shares.
(b) Upon commencement of the Trust's operations, the Distributor will hold
itself available to receive orders, satisfactory to the Distributor,
for the purchase of the Shares and will accept such orders and will
transmit such orders and funds received by it in payment for such
Shares as are so accepted to the Trust's transfer agent or custodian,
as appropriate, as promptly as practicable. Purchase orders shall be
deemed effective at the time and in the manner set forth in the
prospectus. The distributor shall not make any short sales of shares.
(c) The offering price of the Shares shall be the net asset value per
share of the Shares (as defined in the Declaration of Trust) and as
determined as set forth in the prospectus, plus the sales charge
(determined as set forth in the prospectus). The Trust shall furnish
the Distributor, with all possible promptness, an advice of each
computation of net asset value and offering price.
(d) The above-mentioned sales charge shall constitute the entire
compensation of the Distributor, except that the Distributor may also
be compensated through payments under the Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
3. Duties of the Trust
(a) Maintenance of Federal Registration. The Trust shall, as its expense,
take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to
register and maintain registration of a sufficient number of Shares
under the 1933 Act. The Trust agrees to file from time to time such
amendments, reports and other documents as may be necessary in order
that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration
statement or prospectus which omission would make the statements
therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at its
expense, use its best efforts to qualify and maintain the
qualifications of an appropriate number of Shares for sale under the
securities laws of such states as the Distributor and the Trust may
approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Trust as a broker or
dealer in such states; provided that the Trust shall not be required
to amend its Declaration of Trust or By-Laws to comply with the laws
of any state, to maintain an office in any state, to change the terms
of the offering of the Shares in any state, to change the terms of the
offering of the Shares in any state from the terms set forth in its
prospectus, to qualify as a foreign corporation in any state or to
consent to service of process in any state other than with respect to
claims arising out of the offering and sale of the Shares. The
Distributor shall furnish such information and other material relating
to its affairs and activities as may be required by the Trust in
connection with such qualifications.
(c) Copies of Reports and Prospectus. The Trust shall, at its expense,
keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Shares, including such reasonable number of copies of
its prospectus and annual and interim reports as the Distributor may
request and shall cooperate fully in the efforts of the Distributor to
sell and arrange for the sale of the Shares and in the performance of
the Distributor under this Agreement.
<PAGE>
4. Conformity with Applicable Law and Rules
The Distributor agrees that in selling Shares hereunder it shall
conform in all respects with the laws of the United States and of any
state in which Shares may be offered, and with applicable rules and
regulations of the NASD.
5. Expenses
(a) The Trust shall bear all costs and expenses of the continuous offering
of its Shares in connection with : (i) fees and disbursements of its
counsel and independent accountants, (ii) the preparations, filing and
printing of any registration statements and/or prospectus required by
and under the federal securities laws, (iii) the preparation and
mailing of annual and interim reports, prospectus and proxy materials
to shareholders and (iv) the qualifications of Shares of the Trust for
sale under the securities laws of such states or other jurisdictions
as shall be selected by the Trust and the Distributor and the cost and
expenses payable to each such state for continuing qualification
therein.
(b) The Distributor shall bear (i) the costs and expenses of preparing,
printing and distributing any materials not prepared by the Trust and
other materials used by the Distributor in connection with this
offering of Shares for sale to the public, including the additional
cost of printing copies of the prospectus and of annual and interim
reports to shareholders other than copies thereof required for
distribution to shareholders or for filing with any federal securities
authorities, (ii) any expenses of advertising incurred by the
Distributor in connection with such offering and (iii) the expenses of
registration or qualification of the Distributor as a dealer or broker
under federal or state laws and the expenses of continuing such
registration or qualification.
6. Independent Contractor
In performing its duties hereunder, the Distributor shall be an
independent contractor and neither the Distributor, nor any of its
officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties
hereunder. The Distributor shall be responsible for its own conduct
and the employment, control, and conduct of its agents and employees
under applicable statutes and agrees to pay all employee taxes
thereunder.
<PAGE>
7. Indemnification
(a) Indemnification of Trust. The Distributor agrees to indemnify and hold
harmless the Trust and each of its present former trustees, officers,
employees, representatives and each person, if any, who controls or
previously controlled the Trust within the meaning of Section 15 of
the 1933 Act against any and all losses, liabilities, damages, claims
or expenses (including the reasonable costs of investigating or
defending any alleged loss, liability, damage, claims or expense and
reasonable legal counsel fees incurred in connection therewith) to
which the Trust or any such person may become subject under the 1933
Act, under any other statute, at common law, or otherwise, arising out
to the acquisition of any Shares by any person which (i) may be based
upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be
based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus,
shareholder report or other information covering Shares filed or made
public by the Trust or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in
reliance upon information furnished to the Trust by the Distributor.
In no case (i) is the Distributor's indemnity in favor of the Trust,
or any person indemnified to be deemed to protect the Trust or such
indemnified person against any liability to which the Trust or such
person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of his duties or by
reason of his reckless disregard of his obligations and duties under
this Agreement or (ii) is the Distributor to be liable under its
indemnity agreement contained in this Paragraph with respect to any
claim made against the Trust or any person indemnified unless the
Trust or such person, as the case may be, shall have notified the
Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Trust or upon such
person (or after the Trust or such person shall have received notice
to such service on any designated agent.) However, failure to notify
the Distributor of any such claim shall not relieve the Distributor
from any liability which the Distributor may have to the Trust or any
person against whom such action is brought otherwise than on account
of the Distributor's indemnity agreement contained in this Paragraph.
<PAGE>
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the
defense of any suit brought to endorse any such claim, but, if the
Distributor elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Distributor and satisfactory
to the Trust and to the defendant or defendants who are entitled to
such indemnification. In the event that the Distributor elects to
assume the defense of any suit and retain legal counsel, the Trust and
the defendant or defendants who are entitled to such indemnification,
shall bear the fees and expenses of any additional legal counsel
retained by them. If the Distributor does not elect to assume the
defense of any such suit, the Distributor will reimburse the Trust and
the defendant or defendants entitled to such indemnification for the
reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the
commencement of any litigation of proceedings against it or any of its
officers, employees or representatives in connection with the issue or
sale of any Shares.
(b) Indemnification of the Distributor. The Trust agrees to indemnify and
hold harmless the Distributor and each of its present or former
directors, officers, employees, representatives and each person, if
any, who controls or previously controlled the Distributor within the
meaning of Section 15 of the 1933 Act, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares
by any person which (i) may be based upon any wrongful act by the
Trust or any of the Trust's trustees, officers, employees or
representatives (other than the Distributor), or (ii) may be based
upon any untrue statement or alleged untrue statement or a material
fact contained in a registration statement, prospectus, shareholder
report or other information covering Shares filed or made public by
the Trust or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to made the statements upon
information furnished to the Trust by the Distributor. In no case (i)
is the Trust's indemnity in favor of the Distributor, or any person
indemnified to be deemed to protect the Distributor or such
indemnified person against any liability to which the Distributor or
such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of his obligations and
duties under this Agreement, or (ii) is the Trust to be liable under
its indemnity agreement contained in this Paragraph with respect to
any claim made against Distributor or person indemnified unless the
Distributor or such person, as the case may be, shall have notified in
the Trust in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or
upon such person (or after the Distributor or such person shall have
received notice of such service on any designated agent.) However,
failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which the Trust may have to the Distributor
or any person against whom such action is brought otherwise than on
account of the Trust's indemnity agreement contained in this
Paragraph.
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit
brought to enforce any such claim, but if the Trust elects to assume
the defense, such defense shall be conducted by legal counsel chosen
by the Trust and satisfactory to the Distributor and to the defendant
or defendants entitled to such indemnification. In the vent that the
Trust elects to assume the defense of any suit and retain legal
counsel, the Distributor and the defendant or defendants entitled to
such indemnification, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect
to assume the defense of any such suit, the Trust will reimburse the
Distributor and the defendant or defendants entitled to such
indemnification for the reasonable fees and expenses of any legal
counsel retained by them. The Trust agrees to promptly notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its trustees, officers, employees, or
representatives in connection with the issue or sale of an Shares.
8. Authorized Representatives
The Distributor is not authorized by the Trust to give on behalf of
the Trust any information or to make any representations in connection
with the sale of Shares other than the information and representations
contained in a registration statement or prospectus filed with the
Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and
prospectus may be amended or supplemented from time to time, or
contained in shareholder reports or other material that may be
prepared by or on behalf of the Trust for the Distributor's use. This
shall not be construed to prevent the Distributor from preparing and
distributing tombstone ads and sales literature or other materials as
it may deem appropriate. No person other than the Distributor is
authorized to act as principal underwriter (as such term is defined in
the 1940 Act) for the Trust.
<PAGE>
9. Term of Agreement
The term of this Agreement shall begin on the date first above and
unless sooner terminated as hereinafter provided, this Agreement shall
remain in effect through June 15, 1989. Thereafter, this Agreement
shall continue in effect from year to year, subject to the termination
provisions and all other terms and conditions thereof, so long as such
continuation shall be specifically approved at least annually by the
Board of Trustees or by vote of a majority of the outstanding voting
securities of the Trust, and concurrently with such approval by the
Board of Trustees or prior to such approval by the holders of the
outstanding voting securities of the Trust, as the case may be, by the
vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons of any such party. The
Distributor shall furnish to necessary to evaluate the terms of this
Agreement or any extension, renewal or amendment hereof.
10. Amendment or Assignment of Agreement
This Agreement may not be amended or assigned except as permitted by
the 1940 Act, and this Agreement shall automatically and immediately
terminate in the event of its assignment.
11. Termination of Agreement
This Agreement may be terminated by either party hereto, without the
payment of any penalty, on not more than upon 60 days' nor less than
30 days' prior notice in writing to the other party; provided, that in
the case of termination by the Trust such action shall have been
authorized by resolution of a majority of the trustees of the Trust
who are not parties to this Agreement or interested persons of any
such party, or by vote of a majority of the outstanding voting
securities of the Trust.
12. Miscellaneous
The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction of effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take
any action contrary to its Declaration of Trust or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject
or by which it is bound, or to relieve or deprive the Board of
Trustees of the Trust of responsibility for and control of the conduct
of the affairs of the Trust.
13. Definition of Terms
Any questions 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 interpretation 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
Securities and Exchange Commission validly issued pursuant to the 1940
Act. Specifically, the terms "vote of a majority of the outstanding
voting securities", "interested persons", "assignment" and "affiliated
person", as used in Paragraphs 8, 9 and 10 hereof, shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or
of general application, such provisions shall be deemed to incorporate
the effect of such rule, regulation or order.
14. Compliance with Securities Laws
The Trust represents that it is registered as an open-end management
investment company under the 1940 Act, and agrees that it will comply
with all the provisions of the 1940 Act and of the rules and
regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940
Act, and 1933 Act and, subject to the provisions of Section 4(d), all
applicable "Blue Sky" laws. The Distributor agrees to comply with all
of the applicable terms and provisions of the Securities Exchange Act
of 1934.
15. Notices
Any notice required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor or to the Trust at 222 West College
Avenue, Appleton, Wisconsin, 54919-0007.
<PAGE>
16. Governing Law
This Agreement shall be governed and construed in accordance with the
laws of the State of Wisconsin.
17. No Shareholder Liability
The Distributor understands that the obligations of this Agreement are
not biding upon any shareholder of the Trust personally, but bind only
the Trust's property; the Distributor represents that it has notice of
the provisions of the Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ John H. Pender
- ----------------------------- -------------------------------
Robert G. Same, Secretary John H. Pender, President
ATTEST: AAL DISTRIBUTORS INC.
/s/ Robert G. Same /s/ Rochelle Lamm Wallach
- ----------------------------- -------------------------------
Robert G. Same, Secretary Rochelle Lamm Wallach, President
<PAGE>
EXHIBIT A TO THE MUTUAL FUNDS DISTRIBUTION AGREEMENT
1. The AAL Capital Growth Fund
2. The AAL Income Fund
3. The AAL Municipal Bond Fund
4. The AAL Money Market Fund
<PAGE>
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ Rochelle Lamm Wallach
- ----------------------------- -------------------------------
Robert. G. Same, Secretary Rochelle Lamm Wallach,
Vice President
ATTEST: AAL DISTRIBUTORS INC.
/s/ Maureen A. O'Hern /s/Robert G. Same
- ------------------------------ -------------------------------
Maureen A. O'Hern Robert G. Same
Asst. Secretary Senior Vice President
<PAGE>
AMENDMENT NO. 8
TO
DISTRIBUTION AGREEMENT
Effective December 29, 1997, The AAL Mutual Funds Distribution Agreement (the
"Agreement") dated June 15, 1987, as amended between The AAL Mutual Funds and
AAL Capital Management Corporation (f/k/a AAL Distributors, Inc.), is further
amended as follows:
1. Exhibit A to the Agreement is amended to add The AAL Balanced Fund.
A revised Exhibit A, effective as of the date of this Amendment No. 8 is
attached and incorporated herein.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 8 to be
executed by their duly authorized officers.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
/s/ Robert G. Same /s/ Ronald G. Anderson
- ----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
<PAGE>
EXHIBIT A
TO
THE AAL MUTUAL FUNDS DISTRIBUTION AGREEMENT
(EFFECTIVE DECEMBER 29, 1997)
1. The AAL Capital Growth Fund
2. The AAL Bond Fund
3. The AAL Municipal Bond Fund
4. The AAL Money Market Fund
5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001
6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006
7. The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)
8. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)
9. The AAL International Fund
10. The AAL Small Cap Stock Fund
11. The AAL High Yield Bond Fund
12. The AAL Balanced Fund
EXHIBIT 24(b)(8)(a)
FIRST AMENDED
CUSTODIAN CONTRACT
Between
THE AAL MUTUAL FUNDS
and
FIRST WISCONSIN TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property of
Each Fund Held by the Custodian . . . . . . . . . . . . . . . . . . . . . 3
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . . . . 3
2.3 Registration of Securities . . . . . . . . . . . . . . . . . . . 7
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Payments for Shares . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Investment and Availability of Federal Funds. . . . . . . . . . . 9
2.7 Collection of Income. . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Payment of Fund Moneys . . . . . . . . . . . . . . . . . . . . . 10
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. . . . . . . . . . . . . . . . 13
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund. . . . . . . . . . . . . . . . . . . . . . 13
2.11 Appointment of Agents . . . . . . . . . . . . . . . . . . 14
2.12 Deposit of Fund Assets in Securities Systems. . . . . . . 14
2.13 Segregated Account . . . . . . . . . . . . . . . . . . . . 17
2.14 Ownership Certificates for Tax Purposes. . . . . . . . . . 19
2.15 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.16 Communications Relating to Fund
Portfolio Securities. . . . . . . . . . . . . . . . . . 19
2.17 Proper Instructions. . . . . . . . . . . . . . . . . . . . 20
2.18 Actions Permitted Without Express Authority. . . . . . . . 21
2.19 Evidence of Authority. . . . . . . . . . . . . . . . . . . 22
3. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1 Portfolio Accounting Services. . . . . . . . . . . . . . . . . . . 23
3.2 Expense Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.3 Fund Valuation and Financial
Reporting Services. . . . . . . . . . . . . . . . . . . . 25
3.4 Tax Accounting Services . . . . . . . . . . . . . . . . . . . . . . 26
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5. Opinion of Fund's Independent Account . . . . . . . . . . . . . . . . . 28
6. Reports to Fund by Independent Public Accountants . . . . . . . . . . . 28
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . . 28
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . . 29
9. Effective Period, Termination and Amendment . . . . . . . . . . . . . . 30
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11. Interpretive and Additional Provisions . . . . . . . . . . . . . . . . . 33
12. Additional Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13. Wisconsin Law to Apply. . . . . . . . . . . . . . . . . . . . . . . . . . 34
14. Prior Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FIRST AMENDED CUSTODIAN CONTRACT
This Contract between The AAL Mutual Funds, a business trust organized
and existing under the laws of Massachusetts having its principal place of
business at 222 West College Ave., Appleton, Wisconsin 54919-0007, hereinafter
called the "Trust", and First Wisconsin Trust Company, a Wisconsin corporation,
having its principal place of business at 777 East Wisconsin Avenue, P.O. Box
701, Milwaukee, Wisconsin 53201-0701, hereinafter called the "Custodian", is
entered into on this 29th day of October, 1987. This supersedes the previous
Custodian Contract dated June 15, 1987.
WITNESSETH:
WHEREAS, the Trust is authorized to issue units of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust is authorized to issue units of beneficial interest in
separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer units in three series, AAL
Capital Growth Series, AAL Income Series and AAL Municipal Bond Series (such
series together with any other series subsequently established by the Trust and
made subject to this Contract in accordance with paragraph 12 hereof, being
herein referred to collectively as the "Funds" and individually as a "Fund");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It The Trust hereby
employs the Custodian as the custodian of the assets of each fund. Each Fund
shall deliver to the Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by such Fund from time to time, and the
cash consideration received by it for such units of beneficial interest, $0.01
par value ("Shares"), of such Fund as may be issued or sold from time to time.
The Custodian shall not be responsible for any property of a Fund held or
received by such Fund and not delivered to the Custodian. With respect to the
custody and disposition of certain of each Fund's assets, the Custodian shall
enter into agreements substantially in the form of the Customer Agreement,
Procedural Agreement and Safekeeping Agreement attached as Exhibits A, B and C,
respectively.
The Custodian may from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Trustees of the Trust, and
provided that the Custodian shall have no more or less responsibility or
liability to the Trust on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian,
provided that the Custodian's agreement with any such sub-custodian imposes on
such sub-custodian responsibilities and liabilities similar in nature and scope
to those imposed by this Contract with respect to the functions to be performed
by such sub-custodian. The Custodian is authorized and directed to enter into a
Subcustodian Agreement with Morgan Guaranty Trust Company of New York
substantially in the form set forth in Exhibit D hereto.
2. Duties of the Custodian with Respect to Property of Each Fund Held By
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, including all securities
owned by each Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury or in some
other securities depository or book0entry system that complies with Section
17(f) of the Investment Company Act of 1940 and Rule 17f-4 promulgated
thereunder, collectively referred to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities System
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
2.3 1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Sections 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face amount
or number of units; provided that, in any such case, the new securities are
to be delivered to the Custodian.
7) To the broker selling the same for examination in accordance with
the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the particular Fund, which may be in
the form of cash or obligations issued by the United States government, its
agencies or instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery of
securities owned by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the particular Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the particular Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any Contract market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the particular Fund initially set forth as
Exhibits A, B and C;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the holders
of Shares in connection with distributions in kind, as may be described
from time to time in the Trust's currently effective prospectus, in
satisfaction of requests by holders of Shares for repurchase or redemption;
and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer of the
Trust and certified by the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper corporate
purposes, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the appropriate Fund
or in the name of any nominee of such Fund or of any nominee of the Custodian or
in the name or nominee name of any agent appointed pursuant to Section 2.11 or
in the name or nominee name of any sub-custodian appointed pursuant to Article
1. All securities accepted by the Custodian on behalf of a Fund under the terms
of this Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate account
or accounts in the name of each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for he account of such Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a Fund maybe
deposited by it to its credit as Custodian at First Wisconsin National
Bank-Milwaukee or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every such bank
or trust company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the funds to be
deposited with it shall be approved by vote of a majority of the Board of
Trustees of the Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for each Fund's Shares or from the Transfer Agent of such Fund and deposit into
such Fund's account such payments as are received for Shares of the Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Trust and the Transfer Agent of any receipt by it of
payments for Shares of a Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions,
1) invest in such instruments as may be set forth in such instruction
on the same day as received all federal funds received after a time agreed
upon between the Custodian and the Trust; and
2) make federal funds available to the appropriate Fund as of
specified times agreed upon from time to time by the Trust and the
Custodian in the amount of checks received in payment for Shares of the
particular Fund which are deposited into that Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which each Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the appropriate Fund's custodian account.
Without limiting the generality of the foregoing, the Custodian shall detach and
present for payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on securities held
hereunder. Income due a Fund on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith, other than to provide
the Trust with such information or data as maybe necessary to assist the Trust
in arranging for the timely delivery to the Custodian of the income to which the
Fund is properly entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Fund in the following cases only:
1) Upon the purchase of securities, futures contracts or options
on futures contracts for the account of the Fund but only (a) against
the delivery of such securities or evidence of title to futures
contracts or options on futures contracts to the Custodian (or any
bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the name of
a nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of repurchase
agreements entered into between the Fund and the Custodian, or another
bank, (i) against delivery of the securities either in certificate
form or through a entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against delivery of
the receipt evidencing purchase by the particular Fund of securities
owned by the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from such Fund;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for the
account of such Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee of the Trust
signed by an officer of the Trust and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment, setting
forth the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account of a
Fund is made by the Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Trust for such
securities to the same extent as if the securities had been received by the
Custodian, except that in the case of repurchase agreements entered into by a
Fund with a bank which is a member of the Federal Reserve System, the Custodian
may transfer funds to the account of such bank prior to the receipt of written
evidence that the securities subject to such repurchase agreement have been
transferred by book-entry into a segregated nonproprietary account of the
Custodian or any sub-Custodian maintained with the Federal Reserve Bank of
Chicago or of the safe-keeping receipt, provided that such securities have in
fact been so transferred by book-entry, or prior to receipt of such written
evidence upon notification that the transfer has been approved through the
book-entry delivery system.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund. From such
finds as may be available for the purpose but subject to the limitations of the
Declaration of Trust and any applicable votes of the Board of Trustees of the
Trust pursuant thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders of Shares of a
Fund who have delivered to the Transfer Agent a request for redemption or
repurchase of their Shares. In connection with the redemption or repurchase of
Shares of a Fund, the Custodian is authorized upon receipt of instructions from
the Transfer Agent to wire funds to or through a commercial bank designated by
the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (any may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, or in any other securities depository or book-entry
system which complies with Section 17(f) of the Investment Company Act of 1940
and Rule 17f-4 promulgated thereunder, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep securities of such Fund in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of such
Fund which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of
such Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such payment and transfer
for the account of the Fund. The Custodian shall transfer securities sold
for the account of such Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred tot he
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund. The
Custodian shall identify all transfers of securities to and from the
Securities System which are for the account of the Fund, and such reports
shall be maintained for the Fund by the Custodian and shall be made
available and provided to the Fund at its request. The Custodian shall
furnish such Fund confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's transactions
in the Securities System for the account of the Fund;
4) The Custodian shall provide such Fund with any report obtained by
the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in
the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
custodian shall be liable to the Trust for any loss or damage to a Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim against
the Securities System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that the Trust
has not been made whole for any such loss or damage.
2.13 Segregated Account. The custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of each Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
custodian pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Trust, the Custodian and a broker/dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
particular Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the particular Fund or
commodity futures contracts or options thereon purchased or sold by such Fund,
(iii) for the purposes of compliance by the particular Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and (iv)
for other proper corporate purposes, but only in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed by an officer of
the Trust and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes. These agreements are initially set
forth as Exhibits A, B and C, hereto.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of each Fund held by it and in connection with transfers of
securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of a
Fund or a nominee of a Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.16 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith, notice of exercise options purchased or sold by
a Fund, and of the maturity of futures contracts purchased or sold by a Fund)
received by the Custodian from issuers of the securities being held for a Fund.
With respect to tender or exchange offers, the Custodian shall transmit promptly
to the Trust all written information received by the Custodian from issuers of
the securities held by a Fund whose tender or exchange is sought and from the
party (or is agents) making the tender or exchange offer. If the Trust desires
to take action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian a least three business
days prior to the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person persons as
the Board of Trustees shall from time to time authorize. Each such writing shall
identify the Fund affected and shall set forth the specific transaction or type
of transaction involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Trust shall cause all oral instructions to be confirmed in
writing. It is understood and agreed that the Board of Trustees has authorized
AAL Advisors, Inc. (the "Investment Advisor"), as investment advisor of each
Fund pursuant to an Investment Advisor Agreement dated June 15, 1987, between
the Investment Advisor and the Trust, to deliver Proper Instructions with
respect to all matters for which Proper Instructions are required by this
Article 2. The Custodian may rely upon the certificate of an officer of the
Investment Advisor with respect to the person or persons authorized on its
behalf to sign, initial or give Proper Instructions for the purposes of this
Article 2. Upon receipt of a certificate of the Secretary of an Assistant
Secretary as to the authorization by the Board of Trustees of the Trust
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for each Fund's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the
Trust;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Trust, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of each Fund except as otherwise
directed by the Board of Trustees of the Trust.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper believed by it to be genuine and to have been properly executed by or on
behalf of the Trust. The Custodian may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Board of
Trustees of the Trust to compute the net asset value per share of the
outstanding shares of each Fund and shall keep the books of account for each
Fund. In particular, the Custodian shall provide the following accounting and
reporting services: 3.1 Portfolio Accounting Services. The Custodian shall
provide the following portfolio accounting and reporting services for each Fund:
1) Maintain daily portfolio records for each Fund on a trade date
basis using security trade information communicated from the Investment
Advisor:
2) On each business day record the prices of the portfolio positions
of each Fund as obtained from a source approved by the Board of Trustees;
3) Record interest and dividend accrual balances each business day on
the portfolio securities of each Fund and calculate and record each Fund's
gross earnings on investments for that day;
4) Determine gains and losses on portfolio security sales on a daily
basis for each Fund and identify such gains and losses as short-short,
short or long-term. Account for periodic distributions of gain to
shareholders of each Fund and maintain undistributed gain or loss balances
as of each business day; and
5) Provide each Fund with portfolio-based reports on the foregoing on
a periodic basis as mutually agreed upon between the Board of Trustees and
the Custodian.
3.2 Expense Accrual. The Custodian shall provide accounting and reporting
services relating to the accrual of expenses for each Fund as described below:
1) On each business day, calculate the amounts of expense accrual for
each Fund according to the methodology, rate or dollar amount specified by
the Board of Trustees;
2) Account for expenditures and maintain expense accrual balances for
each Fund at a level of accounting detail specified by the Board of
Trustees;
3) Conduct periodic expense accrual reviews for each Fund as requested
by the Board of Trustees comparing actual expenses to accrual amounts; and
4) Issue periodic reports for each Fund detailing expense accruals and
payments at the times requested by Board of Trustees.
3.3 Fund Valuation and Financial Reporting Services. The Custodian shall
provide accounting and reporting services relating to the net asset value of
each Fund as described below:
1) Account for purchases, sales exchanges, transfers, dividend
reinvestments and other activity relating to the shares of each Fund as
reported by the Transfer Agent on a daily basis;
2) Provide the Investment Advisor a daily report of cash reserves
available for short-term investing;
3) Record daily net investment income (earnings for each Fund. Account
for periodic distributions of earnings to shareholders of each Fund and
maintain undistributed net investment income balances as of each business
day;
4) Maintain a general ledger for each Fund in the form specified by
the board of Trustees and produce a set of financial statements for each
Fund as requested from time to time by the Board of Trustees;
5) On each business day of the Funds determine the net asset value of
each Fund in accordance with the accounting policies and procedures
described in the Prospectus;
6) On each business day of the Fund, calculate the per share net asset
value, per share net earnings and other per share amounts reflective of the
operations of each Fund on the basis of the number of shares outstanding as
reported by the Transfer Agent;
7) Issue daily reports detailing such per share information of each
Fund to such persons (including the Transfer Agent and AAL Distributors,
Inc. as distributor of each Fund's Shares (the "Distributor")) as directed
by the Board of Trustees; and
8) Issue to the Board of Trustees monthly reports which document the
adequacy of the accounting detail necessary to support month-end ledger
balances for each Fund.
3.4 Tax Accounting Services. The Custodian shall provide the following tax
accounting services;
1) Maintain tax accounting records for each Fund's investment
portfolio necessary to support IRS tax reporting requirements for regulated
investment companies;
2) Maintain tax lot detail for the investment portfolio of each Fund;
3) Calculate taxable gains and losses on sales of portfolio securities
for each Fund using the tax cost basis defined for the particular Fund;
4) Issue reports to the Transfer Agent of each Fund detailing the
taxable components of income and capital gains distributions as necessary
to assist such Transfer Agent in issuing reports to shareholders; and
5) provide any other reports relating to tax matters for each Fund as
reasonably requested from time to time by the Board of Trustees.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations under this Contract in such manner as will meet the obligations of
each Fund and the Trust under the Investment Company Act of 1940, with
particular attention to Section 31 thereof ad Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to a Fund or the Trust. All such records
shall be the property of the Trust and shall at all time during the regular
business hours of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Trust, employees and agents of the
Securities and Exchange Commission and outside auditors retained for each Fund
by the Board of Trustees. The Custodian shall, at the Trust's request, supply
each Fund with a tabulation of securities owned by the Fund and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Trust and the Custodian,
include certificate numbers in such tabulations.
5. Opinion of Trust's Independent Accountant
The Custodian shall cooperate wit the Trust by taking all
reasonable action, as the Trust may from time to time request, in an effort to
ensure from time to time request, in an effort to ensure from year to year that
each Fund's independent accountants are able to provide an unqualified opinion
with respect to the Custodian's activities hereunder in connection with the
preparation of such Fund's Form N-1A, and Form N-SAR or other annual reports to
the Securities and Exchange Commission (or to its Shareholders) and with respect
to any other requirements of such Commission.
6. Reports to Each Fund by Independent Public Accountants
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, but not more frequently than annually, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts including securities deposited and/or maintained in
a Securities System, relating to the services provided to each Fund by the
Custodian under this Contract; such reports, which shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the Trust, to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Trust
and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Trust for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
In order that the indemnification provisions contained in this Article 8
shall apply, however, it is understood that if in any case where the Trust may
be asked to indemnify or save the Custodian harmless, the Trust shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Custodian will use all
reasonable care to identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Trust. The Trust shall have the option to
defend the Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will so notify the
Custodian, and thereupon the Trust shall take over complete defense of the
claim, and the Custodian shall in such situations initiate no further legal or
other expenses for which it shall seek indemnification under this Article 8. The
Custodian shall in no case confess any claim or make any compromise in any case
in which the Trust will be asked to indemnify the Custodian except with the
Trust's prior written consent.
If the Trust requires the Custodian to take any action with respect to the
portfolio securities held by a Fund, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to such Fund being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto (including amendments
which add or delete Funds of the Trust included within the terms hereof) and may
be terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however, that the Custodian shall not act under Section 2.12 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Trust has approved the initial use
of a particular Securities System and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has reviewed
the use by the Trust of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended; provided further,
however, that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Trust may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction. Upon termination of the Contract the
Trust shall pay to the Custodian such compensation as may be due as of the date
of such termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of Trustees for
any Fund or Funds of the Trust, the Custodian shall, upon termination of this
Contract with respect to such Fund or Funds, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for transfer, all
securities of each such Fund then held by the Custodian hereunder and shall
transfer to an account of the successor custodian all of each such Fund's
securities of the successor custodian all of each such Fund's securities held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Milwaukee, Wisconsin, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000 all securities, funds and other
properties of each Fund as to which this Contract is so terminated then held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property of each such Fund held by it under this Contract and to transfer
to an account of such successor custodian all of each such Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall e
the successor of the Custodian under this Contract with respect to such Fund.
In the event that securities, funds and other properties of Funds with
respect to which this Contract has terminated remain in the possession of the
Custodian after the date of such termination hereof owing to failure of the
Trust to procure the certified copy of vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Trust. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
12. Additional Series
In the event that the Trust establishes one or more series of Shares in
addition to the Funds with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series shall become a Fund hereunder, and shall be maintained and
accounted for by the Custodian on a discreet basis.
13. Wisconsin Law to Apply
This Contract shall be construed and the provisions hereof interpreted
under and in accordance with the internal laws of the State of Wisconsin.
14. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Trust and the Custodian relating to the custody of each
Fund's assets.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first written above.
FIRST WISCONSIN TRUST THE AAL MUTUAL FUNDS
COMPANY (the "Custodian") (the "Trust")
By:/s/ James N. Hintz By: /s/ Rochell Lamm Wallach
- ---------------------------- ----------------------------------
Name: James N. Hintz Name: Rochelle Lamm Wallach
Title: Vice President Title: Vice President
Attest:
<PAGE>
Exhibit A
CUSTOMER AGREEMENT
BETWEEN
____________________________________, AND
THE AAL MUTUAL FUNDS
In consideration of acceptance by _______________________________ (
"Broker" ) of an account for the AAL Mutual Funds ( "Customer" ), Broker and
Customer agree as follows:
1. Customer authorizes Broker to purchase and sell financial futures
contracts, options on financial contracts or options on financial cast contracts
regulated by a federal agency for Customer's account in accordance with
Customer's oral or written instructions. Customer hereby waives any defense that
any such instruction was not in writing as may be required by the Statute of
Frauds or any other law, rule, or regulation.
2. Customer shall pay Broker (1) brokerage and commission charges as agreed
upon by Broker and Customer from time to time, (2) any ordinary and customary
charges imposed on any transaction undertaken for Customer by the exchange or
clearinghouse through which it is executed and any tax or fee imposed on such
transactions by any competent authority or self-regulatory organization, (3) the
amount of any trading loss that may result from transactions by Broker on
Customer's instruction, and (4) interest and service charges on any Customer
deficit balances at the rates customarily charged by Broker, together with
Broker's costs and attorney's fees incurred in collecting such deficit. Such
payments shall be made to Broker at _________________________________, or at
such other addresses as the parties may designate.
3. A detailed statement of all transactions for or on the Customer's behalf
shall be furnished to Customer on a monthly basis as of the last business day of
each calendar month and at such other times as may be agreed upon between Broker
and Customer.
4. Customer shall timely deposit and maintain in the Safekeeping Account at
all times initial margin for Customer's account in accordance with the attached
Procedural Agreement. Customer shall timely pay to Broker the amount of any
additional or variation margin with respect to the Customer's open positions on
financial futures or options contracts in accordance with the Procedural
Agreement. If upon expiration of all notice periods set forth in the Procedural
Agreement Customer still fails to provide additional or variation margin or if
Customer fails to deposit or maintain in the Safekeeping Account required
initial margin, Broker may without further notice to Customer take any action
set forth in Sections 8 and 9 hereof.
5. Customer acknowledges that (a) any trading recommendations and market or
other information communicated to Customer by Broker are incidental to the
conduct of Broker's business as a broker and dealer and do not constitute an
offer to sell or the solicitation of an offer to buy any financial futures or
options contracts or financial instrument that is the subject of any financial
futures or options contract; (b) such recommendations and information, although
based upon information obtained from sources believed by Broker to be reliable,
may be incomplete, may not be verified, and may be changed without notice to
Customer; and (c) Broker makes no representation, warranty or quarantee as to
the accuracy or completeness of any market or other information or trading
recommendation furnished to Customer. Customer understands that officers,
employees, or affiliates of Broker may have position in, may intend to, and may,
buy or sell, financial futures or options contracts or financial instruments
that are the subject of financial futures or options contracts, including
financial futures or options contracts which are the subject of information or
recommendations furnished to Customer, and that the position or transactions of
any such officer, employee, or affiliate may or may not be consistent with the
recommendations furnished by Broker to Customer.
6. All transactions by Broker on Customer's behalf shall be subject to the
applicable constitution, by-laws, rules, regulations, customs, usages, rulings,
and interpretations of the contract market and its clearinghouse on which such
transactions are executed or cleared by Broker or its agents for Customer's
account, and to all applicable governmental acts and statutes (such as the
Commodity Exchange Act ) and to rules and regulations made thereunder; Broker
shall not be liable to Customer as a result of any action taken by Broker or its
agents to comply with any such constitution, by-law, rule, regulation, custom,
usage, ruling, interpretation, act, or statute.
7. Broker shall have no responsibility for delays in the transmission of
orders due to (a) breakdown or failure of transmission or communications
facilities, or (b) any other cause beyond Broker's control. Broker shall have no
responsibility for compliance by Customer with any law or regulation governing
its conduct as a fiduciary.
8. In the event that (a) Customer shall be dissolved or in any other way
terminate, or (b) fail to deposit or maintain initial margin, or make payment of
additional or variation margin, as set forth in Section 4 hereof, Broker may
close out Customer's open positions in whole or in part, sell any or all of
Customer's property held by Broker, buy any securities or other property for
Customer's account, and cancel any outstanding orders and commitments made by
Broker on behalf of Customer. Subject to Broker's obligation to use best efforts
to obtain a fair and reasonable price, any such sale, purchase, or cancellation
may be made at Broker's discretion on the contract or other market or through
the clearinghouse where such business is then transacted, at public auction or
at private sale, without advertising the same and without notice to Customer,
and without prior tender, demand or call upon Customer. Customer shall remain
liable for and shall pay to Broker the amount of any deficiency resulting from
any transaction described above.
9. If at any time Customer fails to deliver to Broker any property
previously sold by Broker on Customer's behalf or fails to deliver financial
instruments in compliance with financial futures or options contracts, Customer
authorized Broker in its discretion to borrow or to buy an property necessary to
make delivery thereof, and Customer shall pay Broker for any cost, loss and
damage which Broker may be required to pay thereon, and for any cost, loss and
damage which Broker may sustain from its inability to borrow or buy any such
property.
10. All communications to Customer shall be to The AAL Mutual Funds,
Attention: ________________________________ [ insert name and title] 222 West
College Avenue, Appleton, Wisconsin, 54919, or to such other address as Customer
may hereafter direct Broker in writing to use. All communications to Broker
shall be to its offices at ______________________
_______________________________________, or at such other address as Broker may
designate.
11. This Agreement, the attached Procedural Agreement, and the Safekeeping
Agreement attached and referred to in the Procedural Agreement contain the
entire agreement between the parties and supersede any prior agreements between
the parties as to the subject matter of this Agreement. Subject to Section 6
hereof, no provision of this Agreement shall in any respect be waived, altered,
modified, or amended unless such waiver, alternation, modification, or amendment
be committed to in writing and signed by Customer and a duly authorized officer
of Broker.
12. This agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the law of the State of
____________________________.
13. This agreement shall inure to the benefit of Broker and Customer and
their respective successors and assigns.
14. If any term or provision hereof, or the application thereof to any
person or circumstances, shall to any extent be contrary to any exchange or
government regulation or otherwise invalid or unenforceable, the remainder of
this Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is contrary invalid, or
unenforceable, shall not be affected thereby, and it shall be enforced to the
fullest extent permitted by regulation and law.
15. The rights and remedies conferred upon the parties hereto shall be
cumulative, and the exercise or waiver of any thereof shall not preclude or
inhibit the exercise of additional rights and remedies.
16. Customer represents that (a) Customer is duly registered under the
Investment Company Act of 1940, as amended, and is validly existing and
empowered to enter into this Agreement and to effectuate transactions in
financial futures contracts, and options on futures or cash contracts as
contemplated hereby; (b) Customer will promptly notify Broker in writing if any
of the above representations shall materially change or cease to be true and
correct; (c) Customer has received read and understand the Commodity Futures
Trading Commission Risk Disclosure Statement and options Risk Disclosure
Statement; and (d) no person or entity has any interest in or control of the
account to which this Agreement pertains other than Customer.
17. Customer and Broker agree to furnish appropriate financial statements
to each other to show any material changes in their financial positions and to
furnish such other information concerning each other as each may reasonably
request.
18. Where the context hereof requires, the singular shall import the plural
and the masculine shall import the feminine and neuter.
19. Broker shall be entitled to rely on any instruction received from any
person identified in writing to Broker by Customer and such instruction shall
bind Customer. Customer agrees to hold Broker harmless against any action taken
by Broker in reliance upon this provision.
20. This Agreement shall become a binding contract between Customer and
Broker when signed by both parties.
THE AAL MUTUAL FUNDS ( "Customer" )
By: ________________________________
Name: ______________________________
(type or print)
Title: _______________________________
Attest: ______________________________
Approve
-----------------------------------
( "Broker" )
By: ________________________________
Name: _____________________________
(type or print)
Title: _______________________________
Attest: ______________________________
Dated: _________________________, 1987
<PAGE>
Exhibit B
PROCEDURAL AGREEMENT
BETWEEN ____________________________________, AND
THE AAL MUTUAL FUNDS
AND FIRST WISCONSIN TRUST COMPANY
WHEREAS the undersigned The AAL Mutual Funds ( "Customer" ) has opened a
trading account with the undersigned __________________________ ( "Merchant" ),
a registered futures commission merchant, for the purpose of trading financial
futures contracts options on futures or cash through said firm; and
WHEREAS in connection with the opening of the trading account, Customer and
Merchant have entered into a Customer Agreement which requires Customer to
deposit as collateral the initial margin with respect to each futures or options
contract as required by the rules and regulations of the Chicago Mercantile
Exchange, the Chicago Board of Trade, the Commodities Exchange, and such other
exchanges on which Merchant may effect or cause to be effected transactions as
broker for Customer; and
WHEREAS Customer, Merchant, and the undersigned First Wisconsin Trust
Company ( "Bank" ) have entered into a Safekeeping agreement establishing an
account entitled " __________________________ for the account of The AAL Mutual
Funds (Customer Segregated Account)", pursuant to which Bank agrees to maintain
a Safekeeping Account for the custody of the initial margin which Customer is
required to deposit and maintain; and
WHEREAS the Customer Agreement and the Safekeeping Agreement both provide
that the rights and duties of the parties thereto are subject to the provisions
of this Agreement.
NOW, THEREFORE, IT IS AGREED THAT:
1. Customer shall deposit and maintain as collateral in the Safekeeping
Account such initial margin as shall be required from time to time by the
exchange on which transactions are effected or caused to be effected by Merchant
as broker for Customer. Customer may deposit amounts in excess of such
requirements. The designation "Customer Segregated Account" in the account title
is intended to indicate the status of the account under the Commodity Exchange
Act and Commodity Futures Trading Commission Regulations; however, the
provisions of this agreement shall be controlling as to the rights of the
parties in the collateral deposited in the account.
2. The initial margin deposited and maintained in the Safekeeping Account,
created pursuant to the Safekeeping Agreement, shall be in the form, as Customer
elects, of cash or of securities of the U.S. Government or of a combination
thereof. Customer may substitute U.S. Government securities of equal or greater
value upon prior approval of the bank, which shall not be unreasonable withheld.
Any separate interest payments thereon shall be payable to Customer when
collected by Bank unless notice has been provided to Bank pursuant to Paragraph
(a) of Section 6 below, and such interest is required to meet additional
variation margin requirements in accordance with the procedure provided in
paragraphs (a) and (b) of Section 6.
3. With respect to the deposit of initial margin, Bank shall be directed by
Customer's custodian order to segregate specified assets in the Safekeeping
Account, and Bank shall promptly provide Merchant and Customer with a written
confirmation of each transfer into the Safekeeping Account.
4. Withdrawals of initial margin from the Safekeeping Account shall be
effected upon receipt by the Bank of Customer's custodian order and Merchant's
prior written verification of such withdrawal. Merchant shall, as promptly as
practical but in any case monthly, inform Customer of the extent of any excess
initial margin in the Safekeeping Account.
5. Payment to Merchant or Customer, as may be appropriate, of variation
margin due to variation in the value of one or more futures or options contracts
held in the trading account ( "variation margin" ), shall be governed by the
following provisions:
(a) If Merchant notifies Customer of the need for variation margin
required by any exchange on which transactions are effected by Merchant as
broker for Customer due to variation in the value of one or more futures or
options contracts held in the trading account prior to 11:30 a.m. New York
time on a business day for Customer, Customer shall promptly provide to
Merchant such variation margin but not later than the end of that business
day. If Merchant notifies Customer of the need for variation margin
subsequent to 11:30 a.m. but prior to 4:00 p.m. New York time on a business
day for Customer, Customer shall promptly provide to Merchant such
variation margin but not later than 10:30 a.m. New York time of the next
succeeding business day for Customer. Merchant shall promptly notify
Customer of the receipt of variation margin.
(b) Merchant shall, as promptly as practical but in any case daily,
inform Customer of the extent of any variation margin due to Customer.
Customer may at any time request information as to the extent of such
variation margin and Merchant shall promptly respond to such request. If
Merchant notifies Customer of customer's right to variation margin
permitted by any exchange on which transactions are effected by Merchant as
broker for Customer due to variation in the value of one or more futures or
options contracts held in the trading account prior to 11:30 a.m. New York
time on a business day for merchant, Merchant notifies Customer of
Customer's right to variation margin subsequent to 11:30 a.m. but prior to
4:00 p.m. New York time on a business day for Merchant, Merchant shall
promptly provide to Customer such variation margin but not later than 10:30
a.m. New York time of the next succeeding business day for Merchant.
6. In the event that Customer fails to make any required payment to
Merchant of variation margin, the following provisions shall apply:
(a) If Merchant has not timely received the requested variation margin
as provided in Paragraph 5(a), Merchant shall give notice ( "Notice" ) to
Bank and Customer of Customer's failure to provide variation margin and the
amount of variation margin required. Bank shall immediately reconvey
Merchant's Notice to Customer. Bank shall not permit any new action to be
taken with respect to the initial margin held in the Safekeeping Account
until further notice from Merchant. Two hours after Merchant shall have
given Notice to Bank of Customer's failure to provide the variation margin,
Merchant shall have access to the initial margin held in the Safekeeping
Account, and Bank shall upon instruction of Merchant immediately transfer
from the Safekeeping Account to or for the account of Merchant such amount
of the initial margin as Merchant shall have specified in the Notice. Bank
shall then promptly inform Customer of its actions taken pursuant to the
instruction of Merchant.
(b) As Merchant elects, it may instruct Bank pursuant to Paragraph (a)
either (i) to transfer to Merchant ownership of securities held in the
Safekeeping Account, valued by Merchant as of the closing market price on
the business day preceding the business day when the Notice was given, or
(ii) to sell at the prevailing market price securities in the Safekeeping
Account and transfer promptly to Merchant proceeds from such sales, or
(iii) a combination of (i) and (ii), in any case not to exceed the amount
of required additional variation margin specified in the Notice. Bank shall
retain any balance in the Safekeeping Account. Merchant shall give
consideration to any timely request by Customer with respect to particular
securities to be transferred or sold.
7. Unless otherwise provided, all notices or other communications called
for by this Agreement shall be given by the most expeditious means possible and
may be given by the most expeditious means possible and may be given by
telephone. If a notice is not given in writing, a written copy shall be provided
to appropriate parties within a reasonable time after the notice is given.
8. Any and all expenses of establishing, maintaining, or terminating the
Safekeeping Account, including without limitation any and all expenses incurred
by bank in connection with the Safekeeping Account, shall be borne by Customer.
9. This Agreement and the Safekeeping Account shall terminate only upon
written consent of Customer and Merchant, at which time Bank shall transfer to
Customer all property held in the Safekeeping Account.
10. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the State of
_____________________________.
FIRST WISCONSIN TRUST
COMPANY ( "Bank" ) ____________________________
( "Merchant" )
By: _____________________ By: _____________________________
Name: ___________________ Name: ___________________________
(type or print) (type or print)
Title: ___________________ Title:____________________________
Attest: __________________ Attest: __________________________
THE AAL MUTUAL FUNDS
("Customer")
By: _____________________________
Name: ___________________________
(type or print)
Title: __________________________
Attest: _________________________
Dated: ____________, 1987
<PAGE>
Exhibit C
SAFEKEEPING AGREEMENT
The AAL Mutual Funds ( "Depositor" ) and _____________________________ (
"Broker" ) have interests in the subject Safekeeping Account pursuant to a
certain Procedural Agreement among broker, Depositor, and First Wisconsin Trust
Company ( "Bank" ), which Procedural Agreement governs over any inconsistent
provisions in this Safekeeping Agreement
__________________, 1987
First Wisconsin Trust Company
777 East Wisconsin Avenue
P.O. Box 701
Milwaukee, WI 54201-0701
Gentlemen:
Depositor hereby requests Bank to open and maintain a Safekeeping Account,
which shall be a subaccount, under the Custodian Agreement between Depositor and
Bank, in the name of " ______________________________ for the account of The AAL
Mutual Funds (Customer Segregated Account)", for all monies and securities now
or hereafter deposited with and accepted by Bank for the initial margin in
financial futures or options contracts transactions.
In such safekeeping capacity Bank is limited to holding the securities in
safekeeping for the various "Funds" of depositor specified in the Custodian
Agreement between Bank and Depositor and dealing with such securities as herein
expressed unless otherwise mutually agreed in writing.
Bank shall make purchases, sales, and deliveries of securities only as
Depositor may direct, and bank is authorized and directed to:
1. Collect income and principal on bearer securities in the account;
2. Dispose of the monies received from income collections, maturity,
redemption, sale or other disposition of the securities pursuant to
said Procedural Agreement;
3. Send a daily confirmation of receipts and disbursements to Depositor;
4. provide a monthly list of securities to Depositor and to Broker
5. On request, confirm to Broker and Depositor all account changes and
positions.
The general conditions of the Safekeeping Agreement shall be those of the
Custodian Agreement between Depositor and Bank.
The compensation of Bank for its services hereunder shall be payable
quarterly and shall be in accordance with its present printed schedule, a copy
of which has been delivered to Depositor. No change in compensation shall be
applicable to this account without written notice to Depositor.
All communications from Bank shall be sent to Depositor pursuant to the
Custodian Agreement, and to Broker at the addresses shown below, or at such
other address as the Depositor or Broker shall from time to time direct.
Depositor is an investment company duly registered under the Investment
Company Act of 1940, as amended, and is not a foreign citizen; if this
citizenship status changes, Depositor will promptly notify Bank in writing.
Either Depositor or Bank may close this account at any time.
Accepted: Very truly yours,
First Wisconsin Trust THE AAL MUTUAL FUNDS
Company ("Bank") ("Depositor")
By: ________________________ By: _______________________
Name: ______________________ Name: _____________________
(type or print) (type or print)
Title: ______________________ Title: _____________________
Attest: _____________________ Attest: ____________________
Acknowledged and Approved:
--------------------------
(Broker)
By: _________________________
Name: _______________________
(type or print)
Title: ______________________
Attest: _____________________
Dated: ______________________
Schedule A, Page 1, to the First Amended
Custodian Contract between The AAL
Mutual Funds and First Wisconsin
Trust Company, October 29, 1987
FIRST WISCONSIN TRUST COMPANY
MUTUAL FUND CUSTODIAL
AGENT SERVICE ANNUAL FEE
Annual Fee based on market value of assets (cost of bonds):
$1.00 per $1,000 on the first $5,000,000
$ .50 per $1,000 on the next $5,000,000
$ .25 per $1,000 on the next $40,000,000
$ .20 per $1,000 on the balance
Minimum Annual Fee $900
Investment Transactions: Purchase, sale, exchange, tender, redemption
(maturity), receipt, delivery
$17.00 per Book Entry Securities (Depository or Federal
Reserve System)
$25.00 per Definitive Securities (Physical)
$75.00 per Euroclear
$ 8.00 per Principal reduction on pass-through certificates
$35.00 per Option/Futures Contract
$12.00 per variation margin transaction
Variation Amount Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which is 1/4
of 1%, is deducted from the variable amount note income at the time it is
credited to your account.
Extraordinary expenses based on time and complexity involved.
Out of Pocket Expenses: Charges to the account.
Fees are billed quarterly based on the value at the beginning of the
quarter.
Schedule A, Page 2, to the First Amended
Custodian between The AAL
Mutual Funds and First Wisconsin Trust
Company, October 29, 1987
PORTFOLIO ACCOUNTING & VALUATION SERVICES (ALL FUNDS)
Annual fee schedule per fund based on average daily net asset market value
of each Fund.
$25,000.00 for the first $40,000,000.00 of the first mutual fund
$20,000.00 for the first $40,000,000.00 for each subsequent mutual fund
2/100 of 1% (2 Basis Points) on the next $200,000,000.00
1/100 of 1% (1 Basis Point) on the balance over $240,000,000.00
Fees are billed monthly
* For the months of July and August 1987, the total fees will be $500.00 and
$1,000.00, respectively, for each of the three AAL Mutual Funds. The above
annual fee schedule will be effective for the month of September 1987, and
thereafter. Fees for the Money Market Fund will commence on March 1, 1998.
AMENDMENT NO. 12
TO
THE FIRST AMENDED CUSTODIAN CONTRACT BETWEEN
THE AAL MUTUAL FUNDS AND
FIRSTAR TRUST COMPANY
(F/K/A FIRST WISCONSON TRUST COMPANY)
Effective December 29, 1997, the First Amended Custodian Contract
("Contract") dated October 29, 1987, between The AAL Mutual Funds and Firstar
Trust Company (f/k/a First Wisconsin Trust Company) is amended as follows:
1. Schedule A (Custodial Agent Fee Schedule) to the Contract effective as of
January 8, 1997, is amended to add The AAL Balanced Fund.
An amended Schedule A, effective December 29, 1997, is attached hereto
All other provisions of the Contract, as amended, and all Sub Custodian
Agreements, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 12 to the
Contract to be signed by their duly authorized officers.
ATTEST FIRSTAR TRUST COMPANY
By: /s/ Mary C.Klabunde By: /s/ Joe D. Redwine
--------------------------- -----------------------------
Mary C. Klabunde Joe D. Redwine
ATTEST: THE AAL MUTUAL FUNDS
By: /s/ Robert G. Same By: Ronald G. Anderson
--------------------------- -----------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
SCHEDULE A
TO
THE OCTOBER 29, 1997, FIRST AMENDED CUSTODIAN
CONTRACT BETWEEN THE AAL MUTUAL FUNDS AND
FIRSTAR TRUST COMPANY, AS AMENDED
FIRSTAR TRUST COMPANY
MUTUAL FUND CUSTODIAL AGENT
FEE SCHEDULE
EFFECTIVE JANUARY 8, 1997
I. Annual fee based on aggregate market value of all AAL Mutual Funds
.00005 (.5 basis points) on all assets.
II. Fees for transactions (purchases, sale, exchange, tender, redemption,
maturity, receipt, delivery)
$6.00 per book entry security (depository or Federal Reserve System)
$25.00 per definitive security (physical)
$75.00 per Euroclear
$8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
$12.00 per variation margin transaction
$10.00 per Fed wire deposit or withdrawal
III. Other fees
Variable rate notes: Used as a short-term investment variable rate notes
offer safety and prevailing high interest rates. Firstar charge, which is 1/4 of
1%, is deducted from the variable rate note income at the time it is credited to
a Fund's account.
Extraordinary expense: Based on time and complexity involved.
Out-of-pocket expenses: Charged to the account.
Fees are billed monthly, based on prior month-end market values and
prior month's transactions.
EXHIBIT 24(b)(8)(b)
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective August 1, 1995, and is between THE CHASE
MANHATTAN BANK, N.A. (The "Bank") and The AAL Mutual Funds (The "Customer).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcusdodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. Use of Subcustodian.
(a) The Bank will identify such Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by Subcustodian will be subject only to
the instructions of the Bank or its agent. Any Securities held in a securities
depository for the account of a Subcustodian will be subject only to the
instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
<PAGE>
5. Deposit Account Transactions.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Account.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and
debits of the particular transaction at any time.
7. Action of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Banker Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty (60) days of receipt, the Customer shall be deemed to
have approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at risk of the Customer. The
Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the bank has agreed to take any action under this agreement.
8. Corporate Action; Proxies.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the Deposit Account with
the proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. Nominees.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the customer or its designated agent
that any such employee or agent is no longer Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telephone, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. The Bank may electronically record any instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any test Keys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provision of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be
liable to the Customer for any loss which shall occur as the result of the
failure of a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be liable
to the Customer if the Bank were holding such Assets in New York. In the
event of any loss to the Customer by reason of the failure of the Bank or
its Subcustodian to utilize reasonable care, the Bank shall be liable to
the Customer only to the extent of the Customer's direct damages, to be
determined based on the market value of the property which is the subject
of the loss at the date of discovery of such loss and without reference to
any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default
or for the solvency of any broker or agent which it or a Subcustodian
appoints unless such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its
obligations under this Agreement, the Bank may rely on the genuineness of
any document which it believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with respect
to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect
the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than as
provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant to this
Agreement;
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations
against Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to,
legal fees. The Bank shall have a lien on and is authorized to charge any
Account of the Customer for any among owing to the Bank under any provision of
this Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign
(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent
public accountant reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (Check one):
Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
x Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
Neither of the above.
This Agreement consists exclusively of this document together with Schedule
A and the following Rider(s) [Check applicable rider(s)]:
ERISA
x MUTUAL FUND
x DOMESTIC SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or enforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(g) Wavier. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
Chase Metro Tech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex: __________________________
Customer: Terrance P. Gallagher, SVP & CFO Treasurer, The AAL Mutual Funds
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007__________
or telex: _________________________
(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty (60) days written notice to the other, provided that such
notice to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty (60)
days following receipt of a notice of termination by the Bank, the bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By: /s/ John H. Pender
-------------------------------
John H. Pender, President
The AAL Mutual Funds
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
----------------------------
Vice President
SSA/AOA2F60.WP5-052693/062995
<PAGE>
STATE OF Wisconsin )
: ss.
COUNTY OF Outagamie )
On this 24 day of July , 1995 before me personally came John H. Pender, to me
known, who being by me duly sworn, did depose and say that he resides in WI at ;
that he is President of The AAL Mutual Funds, the entity described in and which
executed the foregoing instrument; that he/she knows the seal of said entity,
that the seal affixed to said instrument is such seal, that it was so affixed by
order of said entity, and that he/she signed his/her name thereto by like order.
/s/ John H. Pender
---------------------------
John H. Pender
Sworn to before me this 24th
day of July, 1995
/s/ Alice M. Pollitt
- -----------------------------
Alice M. Pollitt
Notary
In and for the County of Outagamie
State of Wisconsin
My Commission Expires on July 18, 1999
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 30 day of June , 1995, before me personally came Rosemary Stidmon,
to me known, who being by me duly sworn, did depose and say that she resides in
New Jersey at 31 Sagamore Drive; that she is a Vice President of THE CHASE
MANHATTAN BANK, (National Association), the corporation described in and which
executed the foregoing instrument; that he/she knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal,
that it was so affixed by order of the Board of Directors of said corporation,
and that he/she signed his/her name thereto by like order.
/s/ Rosemary M. Stidmon
-----------------------------
Rosemary M. Stidmon
Sworn to before me this 30th
day of June, 1995.
/s/ Laiyee Ng
- --------------------------------
Laiyee Ng
Notary
LAIYEE NG
Notary Public, State of New York
No. 01NG-5012929
Qualified in Queens County
Cert. Filed in Kings & N.Y. Counties
Commission Expires June 15, 1997.
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
The AAL Mutual Funds, effective August 1, 1995
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extend that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of section 3:
The terms Subcustodian and securities depositories as used in this Agreement
shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository, which are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, and further
represents that its Board has determined that the use of each Subcustodian and
the terms of each subcustody agreement are consistent with the best interests of
the Fund(s) and its (their) shareholders. The Bank will supply the Customer with
any amendment to Schedule A for approval. The Customer has supplied or will
supply the Bank with certified copies of its Board of Directors resolution(s)
with respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made
pursuant to Section 5 and 6 of this Agreement may be made only for the
purposes listed below. Instructions must specify the purpose for which
any transaction is to be made and Customer shall be solely responsible
to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth
in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper under the instruments governing the Customer; and
(o) Upon the termination of this Agreements set forth in Section 14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by
each of its branches, each branch of a qualified U.S. bank, each
eligible foreign custodian and each eligible foreign securities
depository holding the Customer's Securities pursuant to this
Agreement afford protection for such Securities at least equal to
that afforded by the Bank's established procedures with respect to
similar securities held by the Bank and its securities
depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
GLOBAL CUSTODY
AGREEMENT
WITH THE AAL MUTUAL FUNDS
DATE August 1, 1995
DOMESTIC
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held
in DTC), the following provisions will apply rather than the provisions of
Section 8 of the Agreement:
The Bank will send to the Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of the Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or relate
to legal proceedings within a reasonable time after sufficient copies are
received by the Bank for forwarding to its customers. In addition, the Bank
will follow coupon payments, redemptions, exchanges or similar matters with
respect to Securities in the Custody Account and advise the Customer or the
Authorized Person for such Account of rights issued, tender offers or any
other discretionary rights with respect to such Securities, in each case,
of which the Bank has received notice from the issuer of the Securities, or
as to which notice is published in publications routinely utilized by the
Bank for this purpose.
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
The AAL Mutual Funds, effective August 1, 1995
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except to the extend that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the bank; or (iv) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries. The Customer represents that its Board of Directors has approved
each of the Subcustodians listed in Schedule A to this Agreement and the terms
of the subcustody agreements between the Bank and each Subcustodian, and further
represents that its Board has determined that the use of each Subcustodian and
the terms of each subcustody agreement are consistent with the best interests of
the Fund(s) and its (their) shareholders. The Bank will supply the Customer with
any amendment to Schedule A for approval. The Customer has supplied or will
supply the Bank with certified copies of its Board of Directors resolution(s)
with respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
Section 11. Instructions.
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant to
Section 5 and 6 of this Agreement may be made only for the purposes listed
below. Instructions must specify the purpose for which any transaction is to be
made and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to the Customer by law or
as may be set forth in its prospectus. (a) In connection with the purchase or
sale of Securities at prices as confirmed by Instructions; (b) When Securities
are called, redeemed or retired, or otherwise payable; (c) In exchange for or
upon conversion into other securities alone or other securities and cash
pursuant to any plan or merger, consolidation, reorganization, recapitalization
or readjustment; (d) Upon conversion of Securities pursuant to their terms into
other securities; (e) Upon exercise of subscription, purchase or other similar
rights represented by Securities; (f) For the payment of interest, taxes,
management or supervisory fees, distributions or operating expenses; (g) In
connection with any borrowings by the Customer requiring a pledge of Securities,
but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery to the Bank, its Subcustodian or the Customer's transfer agent of such
shares to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper under the instruments governing the Customer; and
(o) Upon the termination of this Agreements set forth in Section 14(i).
Section 12. Standard of Care; Liabilities.
Add the following subsection (c) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
Section 14. Access to Records.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
GLOBAL CUSTODY AGREEMENT
WITH THE AAL MUTUAL FUNDS
DATE August 1, 1995
DOMESTIC
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions will apply rather than the provisions of Section
8 of the Agreement:
The Bank will send to the Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of the Bank's
nominee or the nominee of a central depository) and communications with
respect to Securities in the Custody Account as call for voting or relate
to legal proceedings within a reasonable time after sufficient copies are
received by the Bank for forwarding to its customers. In addition, the Bank
will follow coupon payments, redemptions, exchanges or similar matters with
respect to Securities in the Custody Account and advise the Customer or the
Authorized Person for such Account of rights issued, tender offers or any
other discretionary rights with respect to such Securities, in each case,
of which the Bank has received notice from the issuer of the Securities, or
as to which notice is published in publications routinely utilized by the
Bank for this purpose.
CHASE
SCHEDULE A
June, 95
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
17f-5 QUALIFIED AGENTS
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Main Branch Buenos Aires
25 De Mayo 130/140
Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Center
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Barclays Bank of
Botswana Ltd. Botswana Ltd
Gaborone Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia SA.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC Ceskoslovenska Obchodni
Banka, A.S. Ceskoslovenska Obchodni Banka
Na Prikope 14 A.S.
115 20 Praha I Praha
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedet S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande International Banking Division
Duchesse Charlotte London
LUXEMBOURG For all other currencies: see
A/c The Chase relevant country
Manhattan Bank, N.A.
London
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A IAA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Kansallis-Osake-Pankki Kanasallis-Osake-Pankki
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A. G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Barclays Bank of
Ghana Ltd. Ghana Ltd.
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
I Kolokotroni Street Athens
10562 Athens Alc Chase Manhattan Bank, N.A.,
GREECE London
Alc No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Dublin
Services Centre
I Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M
19 Herzl Street Tel Aviv
65136 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Mcda I Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P 0 Box 950544-5 Amman
Amman
Shmeisani
JORDAN
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Port Louis Port Louis
MAURITIUS
MEXICO The Chase Manhattan Bank, N.A. No correspondent Bank
(Equities) Hamburgo 213, Piso 7
Colonia Juarez, 06660 Mexico D.F.
MEXICO
(Government Bonds) Banco Nacional de Mexico, No correspondent Bank
Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
I Rue ldriss Lahrizi Casablanca
Casablanca 0 1
MOROCCO
NETHERLANDS ABN AMRO N.V. Credit Lyonnais
Securities Centre Bank Nederland N. V.
P 0 Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den norske Bank Den norske Bank
Kirkegaten 21 Oslo
Oslo I
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
State Life Building No. 1 Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILLIPPINES The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Capital Markets Warsaw
Centre - V Branch
LTI, Kasprzaka 18/20
01-211 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial
de Lisboa Banco Pinto & Sotto Mayor
Servico de Gestaode Titulo Avenida Fontes Pereira de Melo
R. Mouzinho da Silveira, 36 r/c 1000 Lisbon
1200 Lisbon
PORTUGAL
SHANGHM (CHINA) The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Hong Kong
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN (CHINA) The Hong kong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Hong Kong
I st Floor
Central Plaza Hotel
No. I Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0 104
SINGAPORE
SLOVAK REPUBLIC Ceskoslovenska Obchodni Banka, Ceskoslovenska
S.A. (CSOB) Obchodni Banka,
Michalska 18 S.A.
815 63 Bratislava Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
24, Sir Baron Jayatilaka Mawatha, Colomho
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrassc Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
673 Min Sheng East Road - 9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Yildiz Posta Caddesi 52 Istanbul
Dedeman Ticaret Merkezi, Kat 11
80700 Esentepe
Istanbul
TURKEY
U. K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Kurima House
42 George Silundika Avenue
Harare
ZIMBABWE
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O. Box 31936
Lusaka
ZAMBIA
</TABLE>
CUSTODIAN FEE SCHEDULE
BETWEEN
THE CHASE MANHATTAN BANK, N.A.
GLOBAL SECURITIES SERVICES
AND
THE AAL MUTUAL FUNDS
U.S. DOMESTIC ASSETS
All Assets: 0.5 basis points (0.00005)
$12 book-entry transactions (DTC, FED, PTC, etc.)
$22 non-book-entry transactions
ASSETS HELD OVERSEAS
Asset-Based Fee:
8 basis points on all asset held in foreign securities (Group A)
16 basis points on all assets held in foreign securities (Group B)
40 basis points on all assets held in emerging markets (Group C)
Transaction Fee - Emerging markets - $120.00
Other Services
Futures $25 per futures transaction
$6 per mark-to-market wire
Options $25 per transaction
Transfers to
successor custodian Transaction
charges in
accordance
with fee
schedule.
Minimum Fee
$50,000 per annum
Out-of-Pocket Expenses: (i.e., stamp taxes, registration costs,
scrip fees, special transportation costs, etc.): As incurred.
NOTE: Out-of-pocket expenses will be forwarded to AAL for payment Fees are to be
paid monthly based on the month end market value, as reported by AAL.
Group A
Canada Germany Switzerland
CedelItaly United Kingdom
France Japan
Group B
Australia Hong Kong Norway
Austria Ireland Singapore
Belgium Luxembourg Spain
Denmark Netherlands Sweden
Finland New Zealand
Group C
Argentina India Philippines
Bangladesh Indonesia Poland
Botswana Israel Portugal
Brazil Jordan South Africa
ChileMalaysia South Korea
ChinaMauritius Sri Lanka
Colombia Mexico Taiwan
GhanaMorocco Thailand
Greece Pakistan Turkey
Hungary Peru Uruguay
Venezuela
Approved: /s/ John H. Pender
---------------------------------------
John H. Pender, President
The AAL Mutual Funds
Approved: /s/ Jerry Garcia
----------------------------------------
Jerry Garcia, Assistant Treasurer
Chase Manhattan Bank, N.A.
EXHIBIT 24(b)(9)(a)
TRANSFER AND DIVIDEND DISBURSING
AGENT AGREEMENT
Between
THE AAL MUTUAL FUNDS
And
FIRST WISCONSIN TRUST COMPANY
June 15, 1987
<PAGE>
TABLE OF CONTENTS
Page
1. Copies of Corporate Documents . . . . . . . . . . . . . . . . . . . . 1
2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . 2
5. Receipt of Funds for Investment . . . . . . . . . . . . . . . . . . . . 2
6. Shareholder Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 2
7. Unpaid Checks and Drafts . . . . . . . . . . . . . . . . . . . . . . . . 3
8. Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
9. Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . . 3
10. Repurchase and Redemptions . . . . . . . . . . . . . . . . . . . . . . . 4
11. Systematic Withdrawal Plans. . . . . . . . . . . . . . . . . . . . . . . 5
12. Letters of Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
13. Other Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
14. Tax Returns and Reports. . . . . . . . . . . . . . . . . . . . . . . . . 5
15. Record Keeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
16. Other Information Furnished. . . . . . . . . . . . . . . . . . . . . . . 6
17. Correspondence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
18. Communications to Shareholders and Meetings. . . . . . . . . . . . . . . 6
19. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
20. Use of The Agent's Name. . . . . . . . . . . . . . . . . . . . . . . . . 7
21. Duty of Care and Indemnification . . . . . . . . . . . . . . . . . . . . 7
22. Notices Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
23. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
24. Termination, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
25. Remedies Available to Trust. . . . . . . . . . . . . . . . . . . . . . . 9
26. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
TRANSFER AND DIVIDEND DISBURSING AGENT AGREEMENT
THIS AGREEMENT, is entered into on this 15th day of June, 1987, between The
AAL Mutual Funds, a business trust organized and existing under the laws of the
Commonwealth of Massachusetts, having its principal place of business at 222
West College Avenue, Appleton, Wisconsin 54919 (the "Trust") and First Wisconsin
Trust Company, a Wisconsin corporation, having its principal place of business
at 777 East Wisconsin Avenue, P.O. Box 701, Milwaukee, Wisconsin 53201 (the
"Agent").
WITNESSETH
WHEREAS, the Trust is authorized to issue units of beneficial interest in
separate series, with units of each such series representing an interest in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer units in three series, AAL
Capital Growth Series, AAL Income Series and AAL Municipal Bond Series (such
series together with any other series subsequently established by the Trust and
made subject to this Agreement by the mutual consent of the parties hereto being
herein referred to collectively as the "Funds" and individually as a "Fund");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Copies of Corporate Documents. The Trust will furnish the Agent promptly
with copies of any Registration Statements now in effect or hereafter filed by
it with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, or the Investment Company Act of 1940, as amended, together with any
financial statements and Exhibits included therein, and all amendments or
supplements thereto hereafter filed.
2. Transfer of Shares. The Agent is authorized to transfer on our records
from time to time shares of a Fund for which certificates are surrendered to the
Agent in proper form for transfer, and, upon cancellation and destruction
thereof, to countersign, register, and issue new certificates for the same
number of shares and to deliver them pursuant to instructions received from the
transferor. The Agent is authorized to transfer on our records from time to time
shares for which no certificates are issued upon surrender to the Agent of
sufficient documentation in proper form to effect such transfer.
3. Share Certificates. Each Fund shall supply the Agent with a sufficient
supply of blank share certificates representing its shares, in the form approved
from time to time by the Board of Trustees of the Trust, and, from time to time,
shall replenish such supply upon the Agent's request. Such blank stock
certificates shall be properly signed, manually or by facsimile signature, by
the duly authorized officers of the Trust, and shall bear the corporate seal or
facsimile thereof of the Trust; and notwithstanding the death, resignation or
removal of any officer of the Trust authorized to sign such share certificates,
the Agent may continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by the Trust.
4. Lost or Destroyed Certificates. In case of the alleged loss or
destruction of any certificate of stock, no new certificate shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to the Agent and the Trust, and issued by Travelers Insurance
Company or a surety company satisfactory to the Agent.
5. Receipt of Funds for Investment. Upon receipt of any check drawn or
endorsed to the Agent as agent for, or otherwise identified as being for the
account of, a Fund, the Trust, or AAL Distributors, Inc. as the distributor of
the Trust's shares (hereinafter referred to as the "Distributor of the Trust's
shares stamp the check with the date of receipt, determine the amount thereof
due the appropriate Fund and the Distributor, respectively, of such deposits,
such notification to be given as soon as practicable on the next business day
stating the total amount deposited to said accounts during the previous business
day. Such notification shall be confirmed in writing.
6. Shareholder Accounts. Upon receipt of any check referred to in paragraph
5 hereof, the Agent will compute the number of shares in the appropriate Fund
due to the shareholder according to the price of that Fund's shares in effect
for purchases made on the date of such receipt as set forth in the Trust's then
current Prospectus, and:
(a) In the case of a new shareholder, open and maintain a bookshare
account for such shareholder in the appropriate Fund in the name or names
set forth in the subscription application form;
(b) If specifically requested in writing by the shareholder,
countersign, issue and mail, by first class mail, to the shareholder at his
address as set forth on such application, a share certificate for full
shares of the appropriate Fund;
(c) Send to the shareholder a confirmation indicating the amount of
full and fractional shares purchased (in the case of fractional shares,
rounded to three decimal places), the price per share and a historical
confirmation of any transactions made on the shareholder's account since
the inception of the calendar year in which such investment is made; and
(d) In the case of a request to establish an accumulation plan, group
program, withdrawal plan or other plan or program being offered by the
Trust's then current Prospectus, open and maintain such plan or program for
the shareholder in accordance with the terms thereof;
all subject to any reasonable instructions which the Distributor or the Trust
may give to the Agent with respect to rejection of orders for shares.
7. Unpaid Checks and Drafts. In the event that any check or other order for
payment of money on the account of any shareholder or new investor is returned
unpaid for any reason, the Agent will:
(a) Give prompt notification to the Trust of such nonpayment; and
(b) Take such other steps, including redepositing those check in
excess of $2500 for collection or redelivering such check to the
shareholder or new investor and placing a stop transfer order against any
shares in any Fund held by him, as the Trust or the Distributor may
instruct the Agent.
8. Sales Charge. In computing the number of shares to credit the account of
a shareholder pursuant to paragraph 6 hereof, the Agent will calculate the total
of the applicable Distributor and representative sales charges with respect to
each purchase as set forth in the Trust's then current Prospectus and in
accordance with any notification filed with respect to combined and accumulated
purchases, qualifying group purchases, purchases with proceeds from AAL and
other qualifying life insurance and annuities or purchases pursuant to a
reinstatement or exchange privilege; the Agent will also determine the portion
of each sales charge payable by the Distributor to the representative
participating in the sale in accordance with such schedules as are from time to
time delivered by the Distributor to the Agent; provided, however, the Agent
shall have no liability hereunder growing out of the incorrect selection by the
Agent of the gross rate of sales charges except that this exculpation shall not
apply in the event the rate is specified by the Distributor or the Trust and the
Agent fails to select the rate specified.
9. Dividends and Distributions. The Trust will promptly notify the Agent of
the declaration of any dividend or distribution with respect to shares of any
Fund. The Agent will, as soon as reasonably possible after the record date of
any such dividend or distribution, notify the Trust of the total number of
shares of that Fund issued and outstanding as of the record date for such
dividend or distribution and the amount of cash required to pay such dividend or
distribution. The Trust agrees that on or before the mailing date of such
dividend or distribution it will instruct First Wisconsin Trust Company (the
"Custodian Bank") to make available to the Agent sufficient funds in the
dividend and distribution account maintained by the particular Fund with the
Agent to pay such dividend and distribution. The Agent will prepare and mail to
shareholders any checks to which they are entitled by reason of any dividend or
distribution and, in the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, the Agent will make
appropriate credits to their bookshare accounts or prepare and mail to
shareholders certificates, if any, in accordance with their requests submitted
in writing. No later than 1:00 P.M. on any dividend or distribution payment
date, the Agent shall inform the Trust of the total number of full and
fractional shares reinvested by shareholders of the particular Fund. Each such
shareholder shall be notified of any dividend and distribution, including the
amount of any reinvested shares and copies of such notices shall also be sent to
such shareholders' dealers.
10. Repurchases and Redemptions. The Agent will receive and stamp with the
date all certificates and requests delivered to the Agent for repurchase or
redemption of shares of each Fund and the Agent will process such repurchases as
agent for the Distributor an such redemptions as agent for the particular Fund
as follows:
(a) If such certificate or request complies with the standards for
repurchase or redemption as approved by the Trust, the Agent will, on or
prior to the seventh calendar day succeeding the receipt of any such
request for repurchase or redemption in good order, pay from funds
available from time to time in the repurchase and redemption account
maintained by the particular Fund with Custodian, the appropriate
repurchase or redemption price, as the case may be, to the shareholder as
set forth in the then current Prospectus of the Trust.
(b) If such certificate or request does not comply with said standards
for repurchases or redemptions as approved by the Trust, the Agent will
promptly notify the shareholder of such fact, together with the reason
therefor, and shall effect such repurchase or redemption at the price in
effect at the time of receipt of documents complying with said standards,
or, in the case of a repurchase, at such other time as the Distributor
shall so direct. Notification shall be provided by first-class mail for
accounts of $5,000 or less, and by telephone, confirmed by a first-class
letter, for accounts in excess of $5,000; and
(c) The Agent shall notify the Trust and the Distributor as soon as
practicable for each business day of the total number of Shares of each
Fund covered by requests for repurchase or redemption which were received
by the Agent in proper form on the previous business day, such notification
to be confirmed in writing.
<PAGE>
11. Systematic Withdrawal Plans. The Agent will process systematic
withdrawal orders pursuant to the provisions of withdrawal plans duly executed
by shareholders and the current Prospectus of the Trust. Payment upon such
withdrawal orders shall be made by the Agent from the appropriate account
maintained by the particular Fund with Custodian approximately the fifteenth
(15th) day of each month in which a payment has been requested, and he Agent, on
or after the fifth business day prior to the payment date, will withdraw from a
shareholder's account and present for repurchase or redemption as many shares of
the particular Fund as shall be sufficient to make such withdrawal payment
pursuant to the provisions of the shareholder's withdrawal plan and the current
Prospectus of the Trust. From time to time on new systematic withdrawal plans, a
check for a payment date already past may be issued upon request by the
shareholder.
12. Letters of Intent. The Agent will process such letters of intent for
investing shares of each Fund as are provided for in the Trust's current
Prospectus and the Agent will act as Escrow Agent pursuant to the terms of such
letters of intent (as incorporated from the Prospectus by the account
application form) duly executed by shareholders. The Agent will make appropriate
deposits to the account of the Distributor for the adjustment of sales charges
as therein provided and will currently report the same to the Distributor.
13. Other Plans. The Agent will process such accumulation plans, group
programs, exchange programs, reinvestment programs and other plans or programs
for investing in shares of the Funds as are now provided for in the Trust's
current Prospectus and will act as plan agent for shareholders of each Fund
pursuant to the terms of such plans and programs duly executed by such
shareholders.
14. Tax Returns and Reports. In the event that a Fund revises its
investment objectives and policies to provide for the payment of dividends and
other distributions to its shareholders, the Agent will prepare, file with the
Internal Revenue Service and, if required, mail to shareholders such returns for
reporting dividends and distributions paid by the Fund as are required to be so
prepared, filed and mailed by applicable laws, rules and regulations: and the
Agent will withhold such sums as are required to be withhold under applicable
Federal and State income tax law, rules and regulations.
15. Record Keeping. The Agent will maintain records, which at all times
will be the property of the Trust and available for inspection by the Trust and
the Distributor, showing for each shareholder's account in each Fund the
following:
<PAGE>
(a) Name and address;
(b) Number of share held and number of share for which certificates
have been issued.
(c) Historical information regarding the particular account, including
dividends and distributions paid and the date and price for all
transactions on the account;
(d) Any stop or restraining order placed against the account;
(e) Any instructions as to withdrawal orders under withdrawal pans,
letters of intent, dividend address, and any correspondence or instructions
relating to the current maintenance of the account.
The Agent shall be obligated to maintain at the Agent's expense those records
necessary to carry out the Agent's duties hereunder. The remaining records will
be preserved by the Agent, at the particular Fund's expense, in a manner that
shall be determined before any change in the status of said records is made by
the Agent.
16. Other Information Furnished. The Agent will furnish to the Trust and
the Distributor such other information, including shareholder lists and
statistical information as may be agreed upon from time to time between the
Agent and the Trust. The Agent shall notify the Trust of any request or demand
to inspect the stock books of a Fund and will act upon the instructions of the
Trust as to permitting or refusing such inspection.
17. Correspondence. The Agent will answer promptly that correspondence from
shareholders, representatives, the Trust and the Distributor relating to the
Agent's duties hereunder and such other correspondence as may from time to time
be mutually agreed upon between the Agent and the Trust.
18. Communications to Shareholders and Meetings. The Agent will address an
mail communications by each Fund to its shareholders, including financial
reports to shareholders, proxy material for meetings of the shareholders and
periodic communications and publications to shareholders (including publications
to only those shareholders whose accounts in all of the Funds exceed in the
aggregate on amount specified in the Trust's current prospectus).
19. Compensation. The Agent will receive a fee as specified in Schedule A
hereto, payable monthly by each Fund for each shareholder account existing in
that Fund during each month for the performance of all the Agent's duties and
responsibilities hereunder; provided that the Agent will be entitled to
reimbursement for postage expenses incurred in the mailing of all shareholder
communications and publications; and provided further that the Agent shall be
entitled to additional reasonable compensation on a time and materials basis in
connection with the annual proxy solicitation and any shareholder communications
in addition to those currently being distributed. From time to time, a Fund may
request additional reports, dates and/or services which will be provided by the
Agent in accordance with the mutual agreement of the parties hereto as to
additional reasonable fees. In addition, the Agent will be reimbursed by the
appropriate Fund for any out-of-pocket expenses or disbursements which the Agent
may reasonably incur in excess of the Agent's basic overhead expenses incurred
for providing such services to the particular Fund.
20. Use of The Agent's Name. The Trust will not use the Agent's name in any
prospectus, sales literature or other material relating to a Fund or the Trust
in a manner not approved by the Agent in writing before such use; provided,
however, that the Agent hereby agrees to consent to all uses of the Agent's name
which merely refer in accurate terms to the Agent's appointments hereunder or
which are required by the securities and Exchange Commission or a state
securities commission; and, provided further, that in no case will such approval
be unreasonably withheld.
21. Duty of Care and Indemnification. The Agent shall at all times use
reasonable care and act in good faith in performing duties hereunder. Without
limiting the generality of the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances beyond its
control, including acts of civil or military authority, national or state
emergencies, an announced employee strike significant enough to cease mutual
fund transfer operations, fire, mechanical breakdown, flood or catastrophe, acts
of God, insurrection, war, riots or failure of transportation, communication or
power supply. The Trust will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith or negligence, and arising out of, or in
connection with the Agent's duties on behalf of the Trust hereunder. In
addition, the Trust will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit as a
result of the negligence of the Trust or the Distributor (unless contributed to
by the Agent's negligence or bad faith), or as a result of the Agent's acting
upon any instructions executed or orally communicated by a duly authorized
officer or employee of the Trust or the Distributor, according to such lists of
authorized officers and employees furnished the Agent and as amended from tie to
time in writing by the president or Executive Vice President, or as a result of
acting in reliance upon any genuine instrument or stock certificate signed,
counter signed or executed by any person or persons authorized to sign,
counter-sign or execute the same. In order for this paragraph to apply, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Agent harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Trustee promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Trust. The Trust shall have the option to defend the
Agent against any claim which may be the subject of this indemnification and in
the event that the Trust so elects, it will so notify the Agent and thereupon
the Trust shall take over complete defense of the claim and the Agent shall
sustain no further legal or other expenses in such situation for which the Agent
shall seek indemnification under this paragraph. The Agent will in no case
confess any claim or make any compromise in any case in which the Trust will be
asked to indemnify the Agent except with the Trust's prior written consent.
22. Notices. Notices or other communications hereunder shall be in writing
and shall be deemed effective when served or otherwise delivered to either party
hereto at the addresses set forth herein, or at such other addresses as a party
hereto may designate by notice to the other.
23. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
24. Termination. Neither this agreement nor any provisions hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing which shall make specific reference to this agreement and which shall be
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. After the first full year this agreement maybe
terminated upon six months' written notice given by one party to the other,
either in its entirety or as it applies to a particular Fund.
Upon termination of this agreement with respect to any Fund or Funds, the Trust
shall pay to the Agent such compensation as maybe due to the Agent from each
such Fund as of the date of such termination, and shall likewise reimburse the
Agent for any out-of-pocket expenses and disbursements reasonably incurred by
the Agent to such date in connection with the Agent's services to each such
Fund. In the event that in connection with such termination a successor to any
of the Agent's duties or responsibilities hereunder is designated by the Trust
by written notice to the Agent, the Agent shall promptly upon such termination
and at the expense of the Trust, transfer to such successor a certified list of
the shareholders of each Fund as to which the agreement is so terminated (with
name, address and tax identification or Social Security number), a record of the
account of each shareholder of such Funds and the status thereof, and all other
relevant books, records and other data established or maintained by the Agent
under this agreement relating to such Funds and shall cooperate in the transfer
of such duties and responsibilities, including provision for assistance from the
Agent's cognizant personnel in the establishment of books, records and other
data by such successor.
25. Remedies Available to Trust. The Trust's sole and exclusive remedies
under this agreement, in the event it is determined that the Agent is in breach
of its responsibilities and not entitled to indemnification, shall be:
(a) termination; or
(b) to collect damages directly and actually incurred in a sum up to
but not in excess of fifty percentum (50%) of any fees received during the
period of 12 months immediately preceding the Agent's performance or
failure to perform which constitutes a material breach of this agreement;
or
(c) to submit a claim for damages directly incurred by the Trust as a
consequence of the Agent's failure to perform which constituted a material
breach of this agreement, and which act, non-act or event was covered under
the Agent's Banker's Blanket Bond policy or policies, in which event the
Agent agrees to indemnify and save the Trust harmless solely to the extent
of the Agent's best efforts to include the Trust's claim as a Loss Payee
under the Agent's filing of a Proof of Loss under such policy; or
(d) at the Agent's own expense to reprocess and correct the Agent's
administrative errors.
IN NO EVENT SHALL THE AGENT BE LIABLE TO THE TRUST, ANY FUND THEREOF, OR TO
ANY THIRD PARTY, FOR ANY DAMAGES, OTHER THAN THOSE IN CLAUSE (b) ABOVE,
INCLUDING SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OR A LOSS
OF BUSINESS, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF
PREVIOUSLY INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, AND REGARDLESS OF THE
FORM OF ACTION.
26. Miscellaneous. This agreement shall be construed and enforced in
accordance with and governed by the internal laws of the State of Wisconsin. 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 of effect. This agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer on the date written above.
FIRST WISCONSIN TRUST COMPANY THE AAL MUTUAL FUNDS
(the "Agent") (the "Trust")
By: /s/ James N. Hintz By: /s/ John H. Pender
------------------------------ ------------------------------
Name: James A. Hintz Name: John H. Pender
Title: Vice President Title: President
Attest: /s/ Andrea Liddolph Attest: /s/ Robert G. Same
-------------------------- ---------------------------
Assistant Secretary Secretary
<PAGE>
EXHIBIT 24(B)(9)(A)
AMENDMENT NO. 13
TO
THE TRANSFER AND DIVIDEND DISBURSING AGENT AGREEMENT
BETWEEN
THE AAL MUTUAL FUNDS
AND
FIRSTAR TRUST COMPANY
Effective June 1, 1998, the Transfer and Dividend Disbursing Agent Agreement
("Agreement"), dated June 15, 1987, between The AAL Mutual Funds and Firstar
Trust Company (f/k/a First Wisconsin Trust Company) is amended as follows:
1. Schedule A (Mutual Fund Shareholder Service Fee Schedule) to the Agreement,
effective as of June 1, 1998, is amended to add a new fee schedule.
An amended Schedule A, effective as of June 1, 1998, is attached hereto. All
other provisions of this Agreement, as amended, shall be in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. we to be signed
by their duly authorized officers.
ATTEST: FIRSTAR TRUST COMPANY
By ___________________________ By _____________________________
ATTEST: THE AAL MUTUAL FUNDS
By ___________________________ By _____________________________
Robert G. Same, Secretary Ronald G. Anderson, President
<PAGE>
SCHEDULE A
TO
THE AAL MUTUAL FUNDS TRANSFER AND DIVIDEND DISBURSING AGENT
AGREEMENT BETWEEN THE AAL MUTUAL FUNDS AND
FIRSTAR TRUST COMPANY
MUTUAL FUND SHAREHOLDER SERVICES
FEE SCHEDULE EFFECTIVE JUNE 1, 1998
I. Annual Maintenance Fees
A. The AAL Capital Growth, Bond, Municipal Bond, Mid Cap Stock (f/k/a The
AAL Smaller Company Stock Fund); Equity Income (f/k/a The AAL
Utilities Fund); International; Small Cap Stock, High Yield Bond and
Balanced Funds.
$13.00 per account, first 50,000 open accounts; $12.50 per account, next 100,000
open accounts; $12.25 per account, balance of open accounts; and $6.00 per
closed account
B. The AAL Target Funds
$6.00 per open/closed account
C. The AAL Money Market Fund
$15.00 per open account
$ 6.00 per closed account
II. Money Market Fund Drafts
$1.50 each
III. ACH (Automatic Clearing House)
$125.00 per cycle
$0.50 account set-up/charge
$0.35 per item (EFT to account)
$3.25 per correction/reversal/return
IV. IRA/403(b) Maintenance
$12.50 per IRA or 403(b) account
$25.00 cap for multiple IRA or 403(b) accounts with same social security number
(Firstar will charge $12.50 per IRA or 403(b) account, with a $25.00 cap for
multiple IRA or 403(b) accounts with the same social security number.
<PAGE>
V. IRA/403(b) Miscellaneous
Systematic Withdrawals - no charge; Direct Stock Rollovers - no charge;
Transfers Out - no charge; Total Liquidations - no charge; Partial Liquidations
- - no charge; and Transfers In - no charge
VI. Other
Outgoing Wires $10.00 per wire
Stop Payment/Return Item Fee $20.00
All fees not paid by shareholders are billed monthly.
Out-of-pocket expenses are billed monthly
EXHBIT 24(b)(9)(b)
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st day of
July, 1990 by and between the AAL Mutual Funds, a Massachusetts business trust
(the "Fund") ad AAL Advisors, Inc., a Delaware corporation ("Advisors").
WHEREAS, Advisors has offered to provide fund accounting and pricing
services to the Fund at a lower overall rate than First Wisconsin Trust Company
and the Fund desires to have Advisors provide such services; and
WHEREAS, a majority of the Trustees of the Fund and a majority of the
disinterested Trustees of the Fund have approved this Agreement between Advisors
and the Fund, and in so approving the Agreement made the following findings:
a. The Agreement is in the best interest of the Fund and its
Shareholders;
b. the services to be performed pursuant to the Agreement are services
required for the operation of the Fund;
c. Advisors can provide services, the nature and quality of which are at
least equal to those provided by others offering the same or similar
services; and
d. the fees for such services are fair and reasonable in light of the
usual and customary charges made by others for services of the same
nature and quality.
WHEREAS, the Fund is authorized to issue shares in separate series with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund desires Advisors to render the services to the Fund
in the manner and on the terms and conditions hereinafter set forth with respect
to each of the Fund's series identified on Schedule B attached hereto, as
modified from time to time by the mutual consent of the parties.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Services. The Fund hereby engages Advisors, and Advisors accepts such
engagement, to perform accounting and pricing services for the Fund as
described in more detail on Schedule A, as the same may be modified
from time to time by vote of a majority of the Fund's Trustees
including a majority of those who are not interested persons of
Advisors (the "Services"). The Fund agrees that Advisors shall have
ready access to the Fund's agents, books, records, financial
information, management and resources at such times and for such
periods as Advisors deems necessary to perform the Services.
2. Rate of Payment for the Services.
2.1 Contract Price. The Fund agrees to pay Advisors for the Services
at such rate, not to exceed the rates charged by unaffiliated
vendors for comparable Services, as may be approved annually by a
majority of the Fund's Trustees, including a majority of Trustees
who are not parties to this Agreement or interested persons of
Advisors (the "Contract Price"). The initial rate of payment for
Services shall be at the rate of $25,000 per series per year,
plus the actual cost of pricing services from unaffiliated
parties. The Fund shall also pay all expenses, as set forth in
Section 2.2 below, applicable taxes, duties and charges
(including sales, use and excise taxes) levied or assessed as a
result of this Agreement, except those taxes measured solely by
the net income of Advisors. The Contract Price shall be payable
monthly within ten (10) days of the date of invoice. The Contract
Price shall be adjusted annually by mutual agreement.
2.2 Reimbursement for Expenses. Subject to the Fund's prior
approvals, Advisors shall be paid by the Fund for actual expenses
and costs incurred by Advisors in the performance of the
Services, including, but not limited to, long distance telephone
calls, postage, computer time and supplies.
3. Employees. All personnel assigned by Advisors to perform the Services
will be employees of Advisors or its affiliates. Advisors will be
considered, for all purposes an independent contractor, and it will
not, directly or indirectly, act as an agent, servant or employee of
the Fund, or make any commitments or incur any liabilities on behalf
of the Fund without its prior written consent.
4. Advisor's Use of the Services of Others. Advisors may (at its costs
except as contemplated by Paragraph 2.2 of this Agreement) employ,
retain or otherwise avail itself of the Services or facilities of
other persons or organizations for the purpose of providing the Fund
with such information or Services as it may deem necessary,
appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund, or in the discharge of its
overall responsibilities with respect to the Services to be provided
to the Fund.
5. Ownership of Records. All records required to be maintained and
preserved by the Fund pursuant to the provisions of rules or
regulations of the Securities and Exchange Commission under Section
31(a) of the Investment Company Act of 1940 (the "Act") and maintained
and preserved by Advisors on behalf of the Fund are the property of
the Fund and will be surrendered by Advisors promptly on request by
the Fund.
6. Reports to Fund by Advisors. Advisors shall provide the Fund, at such
times as the Fund may reasonably require, with reports relating to the
Services provided by Advisors under this Agreement. Such reports shall
be of sufficient scope and in sufficient detail, as may reasonably be
required by the Fund.
7. Services to Other Clients. Nothing herein contained shall limit the
freedom of Advisors or any affiliated person of Advisors to render
investment advice or corporate administrative services to other
investment companies, to act as investment advisor or investment
counselor to other persons, firms or corporations, or to engage in
other business activities.
8. Limitation of Liability of Advisors. Neither Advisors, nor any of its
officers, directors, or employees, not any person performing
administrative or other functions for the Fund (at the direction or
request of Advisors) in connection with Advisor's discharge of its
obligations undertaken or reasonably assumed with respect to this
Agreement, shall be liable for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except for loss resulting from willful
misfeasance, bad faith, or negligence in the performance of its or
their duties on behalf of the Fund or from reckless disregard by
Advisors or any such person of the duties of Advisors under this
Agreement.
9. Term of Agreement. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter
provided, this Agreement shall be submitted for approval by
shareholders of each series at the first meeting of shareholder of the
Fund occurring after the execution of this Agreement. The Agreement,
if approved at that meeting by a majority of the shares of each
series, will continue in effect from year to year as it pertains to
each such series, subject to the termination provisions and all other
terms and conditions hereof, so long as: (a) such continuation shall
be specifically approved at least annually by the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities
of each such series and, concurrently with such approval by the Board
of Trustees or prior to such approval by the holders of the
outstanding voting securities of each such series, as the case may be,
by the vote, cast in person at a meting called for the purpose of
voting on such approval, of a majority of the Trustees of the Fund who
are not parties to this Agreement or interested persons of any such
party; and (b) Advisors shall not have notified the Fund, in writing,
at least 60 days prior to March 31, 1991 or prior to March 31 of any
year thereafter, that it does not desire such continuation. Advisors
shall furnish to the Fund, promptly upon its request, such information
as may reasonably be necessary to evaluate the terms of this Agreement
or any extension, renewal or amendment hereof.
10. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned either as it pertains generally to all of the
series or as it pertains to a particular series without the
affirmative vote of a majority of the outstanding voting securities of
each series affected by such amendment, and this Agreement shall
automatically and immediately terminate in the event of its
assignment.
11. Termination of Agreement. This Agreement may be terminated by any
party hereto either as it pertains generally to all of the series or
as it pertains to a particular series, without the payment of any
penalty, upon 60 days' prior notice in writing to the other party;
provided, that in the case of termination by the Fund such action
shall have been authorized by resolution of a majority of the Trustees
of the Fund who are not parties to this Agreement or interested
persons of any such party, or by vote of a majority of the outstanding
voting securities of each series affected by such termination.
12. Miscellaneous.
12.1 Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect.
12.2 Interpretation. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to its Declaration
of Trust or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Trustees of the Fund of its
responsibility for and control of the conduct of the affairs of
the Fund.
12.3 Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the 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 Securities and Exchange
Commission validly issued pursuant to the Act. Specifically, the
terms "vote of a majority of the outstanding voting securities,"
"interested person," "assignment," and "affiliated person," as
used in Paragraphs 1, 2.1, 7, 9, 10, and 11 hereof, shall have
the meanings assigned to them by Section 2(a) of the Act. In
addition, where the effect of a requirement of the Act reflected
in any provision of this Agreement is relaxed by a rule,
regulation or order of the Securities and Exchange Commission,
whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order.
12.4 Governing Law. This Agreement shall be construed and governed by
the laws of the state of Wisconsin.
12.5 Amendment. This Agreement, including the Schedules hereto, may be
amended only by an instrument in writing executed by the parties
or their permitted assignees.
12.6 Notices. All communications or notices required permitted by this
Agreement shall be in writing and shall be deemed to have been
give at the earlier of the date when actually delivered to an
officer of a party or when deposited in the United States Mail,
certified or registered mail, postage prepaid, return receipt
requested, and addressed to the principal place of business of
such parties notifies the parties in accordance with this section
of change of address.
12.7 Entire Agreement. This Agreement together with the Schedules
hereto constitutes the entire agreement between the Fund and
Advisors with respect to the subject matter hereof. There are no
restrictions, promises, warranties, covenants or undertakings
other than those expressly set forth herein and therein. This
Agreement supersedes all prior negotiations, agreements and
undertakings between the parties with respect to such subject
matter.
12.8 Enforceability. The invalidity or unenforceability of any
provision hereof shall not affect or impair any other provisions.
12.9 Scope of Agreement. If the scope of any of the provisions of the
Agreement is to broaden any respect whatsoever to prevent
enforcement to its full extent, then such provisions shall be
enforced to the maximum extent permitted by law, and the parties
hereto consent and agree that such scope may be judicially
modified accordingly and that the whole of such provisions of
this Agreement shall not thereby fail, but that the scope of such
provisions shall be curtailed only to the extent necessary to
conform to the law.
<PAGE>
12.10 Agreement Binding Only on Trust Property. Advisors understands
that the obligations of this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund's
property; Advisors represents that it has notice of the Fund's
Declaration of Trust disc laiming shareholder liability for acts
and obligations of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
THE AAL MUTUAL FUNDS
By: /s/ John H. Pender
----------------------------
John H. Pender,
President
AAL ADVISORS INC.
By: /s/ Rochelle Lamm Wallach
-----------------------------
Rochelle Lamm Wallach,
President
<PAGE>
SCHEDULE A
Services to be performed by Advisors:
1. Portfolio Accounting Services. Advisors shall provide the following
portfolio accounting and reporting services for each series of the Fund covered
by this Agreement:
(a) Maintain daily portfolio records for each series on a trade date
basis using security trade information obtained by it as Investment Advisor
to the Fund, or communicated from a Sub-Advisor for the series;
(b) On each business day record the prices of the portfolio positions
of each series as obtained from a source approved by the Board of Trustees;
(c) Record interest and dividend accrual balances each business day on
the portfolio securities of each series and calculate and record each
series' gross earnings on investments for that day;
(d) Determine gains and losses on portfolio security sales on a daily
basis for each series and identify such gains and loses as short-short,
short or long-term. Account for periodic distributions of gain to
shareholders of each series and maintain undistributed gain or loss
balances as of each business day; and
(e) Provide each series with portfolio-based reports on the foregoing
on a periodic basis as mutually agreed upon between the Board of Trustees
and Advisors.
2. Expense Accrual. Advisors shall provide accounting and reporting
services relating to the accrual of expenses as described below for each series
of the Fund covered by this agreement:
(a) On each business day, calculate the amounts of expense accrual for
each series according to the methodology, rate or dollar amount specified
by the Board of Trustees;
(b) Account for expenditures and maintain expense accrual balances for
each series at a level of accounting detail specified by the Board of
Trustees;
(c) Conduct periodic expense accrual reviews for each series as
requested by the Board of Trustees comparing actual expenses to accrual
amounts; and
(d) Issue periodic reports for each series detailing expense accruals
and payments at the times requested by the Board of Trustees.
<PAGE>
3. Valuation and Financial Reporting Services. Advisors shall provide
accounting and reporting services relating to the net asset value of each series
of the Fund's covered by this Agreement as described below:
(a) Account for purchases, sales, exchanges, transfers, dividend
reinvestments and other activity relating to the shares of each series as
reported by the Fund's Transfer Agent on a daily basis;
(b) Provide the Investment Advisor and the Sub Advisor a daily report
of cash reserves available for short term investing;
(c) Record daily the net investment income (earnings) for each series.
Account for periodic distributions of earnings to shareholders of each
series and maintain undistributed net investment income balances as of each
business day;
(d) Maintain a general ledger for each series in the form specified by
the Board of Trustees and produce a set of financial statements for each
series as requested from time to time by the Board of Trustees;
(e) On each business day of the Fund determine the net asset value of
each series in accordance with the accounting policies and procedures
described in the current Prospectus of the Fund;
(f) On each business day of the Fund, calculate the per share net
asset value, per share net earnings and other per share amounts reflective
of the operations of each series on the basis of the number of shares
outstanding as reported by the Transfer Agent;
(g) Issue daily reports detailing such per share information of each
series to such persons (including the Transfer Agent and AAL Distributors,
Inc. as Distributor of the Fund's shares) as directed by the Board of
Trustees; and
(h) Issue to the Board of Trustees monthly reports which document the
adequacy of the accounting detail necessary to support month-end ledger
balances for each series.
4. Tax Accounting Services. Advisors shall provide the following tax
accounting services for each series of the Fund covered by this Agreement:
(a) Maintain tax accounting records for the investment portfolio of
each series necessary to support IRS tax reporting requirements for
regulated investment companies;
(b) Maintain tax lot detail for the investment portfolio of each
series;
<PAGE>
(c) Calculate taxable gains and losses on sales of portfolio
securities for each series using the tax cost basis defined for the
particular series;
(d) Issue reports to the Transfer Agent of each series detailing the
taxable components of income and capital gains distributions as necessary
to assist such Transfer Agent in issuing reports to shareholders; and
(e) Provide any other reports relating to tax matters for each series
as reasonably requested from time to time by the Board of Trustees.
<PAGE>
SCHEDULE B
The AAL Capital Growth Fund
The AAL Income Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund
<PAGE>
AMENDMENT NO.8
TO
ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement between The AAL Mutual Funds and AAL
Advisors Inc. (n/k/a AAL Capital Management Corporation), effective July 1,
1990, as amended, is hereby further amended, effective December 29, 1997, as
follows:
1. Schedule B attached to the Administrative Services Agreement is
amended to add The AAL Balanced Fund. Schedule B, effective as of
December 29, 1997, is attached hereto.
2. Pursuant to section 2.1 of the Administrative Services Agreement,
the annual rate of payment for The AAL Balanced Fund will be at
the annual rate of $35,000 plus the actual costs of the pricing
services from unaffiliated parties.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 29, 1997.
ATTEST: THE AAL MUTUAL FUNDS
By: /s/ Robert G. Same By: /s/ Ronald G. Anderson
----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: AAL CAPITAL
MANAGEMENT
CORPORATION
By: /s/ Robert G. Same By: /s/ Ronald G. Anderson
----------------------------- -------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
<PAGE>
SCHEDULE B
(EFFECTIVE DECEMBER 29, 1997)
The AAL Capital Growth Fund
The AAL Bond Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund
The AAL U.S. Government Zero Coupon Target Fund, Series 2001
The AAL U.S. Government Zero Coupon Target Fund, Series 2006
The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)
The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)
The AAL International Fund
The AAL Small Cap Stock Fund
The AAL High Yield Bond Fund
The AAL Balanced Fund
EXHIBIT 25(b)(9)(c)
SHAREHOLDER SERVICES AGREEMENT
This Agreement effective April 1,1995, by and between The AAL Mutual Funds, a
Massachusetts Business Trust, ("The Funds"), and AAL Capital Management
Corporation, a Delaware Corporation ("CMC").
WHEREAS, The Board of Trustees desires to provide shareholders of The Funds
certain shareholder services now commonly provided in the mutual fund industry
but not currently provided, under contract, to The Funds' shareholders; and
WHEREAS, a majority of the Board of Trustees, including all of the disinterested
Trustees, have approved this Agreement between The Funds and CMC, and in so
approving, made the following findings:
a. The Agreement is in the best interest of The Funds and its
shareholders;
b. The services described in the Agreement are necessary for the
operation of The Funds and are not services that are appropriately
funded by fees paid under The Funds' Rule 12b-1 Distribution Plan;
c. CMC can provide services, the nature and quality of which are at least
equal to those provided by others offering the same or similar
services;
d. The fees for such services are fair and reasonable in light of the
usual and customary charges made by others for the same or similar
services; and
e. CMC has the knowledge and experience concerning the operations of The
Funds that would enable it to provide a quality of service not
currently available from a third party, and
WHEREAS, the Funds desire CMC to render the service to the Funds in the manner
and on the terms and conditions hereinafter set forth with respect to each of
the Funds' Series identified on Schedule A attached hereto, as modified from
time-to-time by the mutual consent of the parties.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Description of Services. CMC shall provide certain shareholder services,
including:
1.1 Operating a toll-free telephone number staffed by licensed investment
professionals at least 9 hours per day. The assistance provided will
include providing current account information as well as explanation
and assistance with The Funds' procedures and practices;
1.2 Operating a recording system, staffed by licensed investment
professionals, to facilitate shareholder telephone transactions and
serve as documentation for such transactions;
1.3 Providing a trained personnel to research and answer shareholder
written correspondence and requests for documents directed to The
Funds;
1.4 Providing, on or before May 1, 1995, the hardware, software
programming and maintenance, to operate a 24 hour Voice Response Unit
(VRU) to provide shareholders with 24 hour access to basic Fund and
account information;
1.5 Quality control of all new accounts;
1.6 Pre-processing of all new accounts and subsequent orders received by
CMC;
1.7 Availability and maintenance of a computerized application for new
account purchases; and
1.8 Electronic Funds processing.
2. Payment for Services. The fee payable to CMC is the difference between the
standard fee schedule of Firstar Trust Company (Firstar) and the fees
currently charged to the Funds by Firstar for active shareholder accounts,
plus reimbursement for actual out-of-pocket expenses incurred by CMC in the
course of providing such services, including, without limitation, expenses
for telephone services and postage. The rate of this fee and the amounts
reimbursed to CMC for out-of-pocket expenses shall be reviewed no less
frequently than annually by the Board of Trustees, at such time as said
Board reviews The Funds' contact with Firstar. Fees under this Agreement
shall be accrued daily and payable monthly.
3. Employees. All personnel assigned by CMC to perform services under the
Agreement will be employees of CMC. CMC will be considered, for all
purposes, an independent contractor, and it will not directly or indirectly
make any commitment or incur any liabilities on behalf of The Funds without
prior written consent from an authorized Officer of the Funds.
4. Term of Agreement. The term of this Agreement shall begin on the date first
above written, and, will continue in effect from year-to-year as it
pertains to each series, subject to the termination provisions and all
other terms and conditions hereof, so long as such continuation shall be
specifically approved at least annually by the Board of Trustees of the
Fund or by vote of a majority of the outstanding voting securities of such
series and, concurrently with such approval by the Board of Trustees or
prior to such approval by the holders of the outstanding voting securities
of such series, as the case may be, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Fund who re not parties to this Agreement or interested
persons of any such party.
5. Termination of Agreement. This Agreement may be terminated by any party
hereto either as it pertains generally to all of the series or as it
pertains to a particular series, without the payment of any penalty, that
in the case of termination by the Fund such actin shall have been
authorized by resolution of a majority of the Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party, or
by vote of a majority of the outstanding voting securities of each series
affected by such termination.
6. Miscellaneous.
6.1 Services by Others. CMC may, at its cost, subcontract with others to
better provide shareholders with the services described in this
Agreement; provided CMC shall be responsible for the performance by
third party(ies) as though CMC had directly provided the service.
6.2 Ownership of Records. CMC shall maintain all records arising from
services provided hereunder and required to be maintained and
preserved by The Funds pursuant to all applicable laws and
regulations. CMC shall surrender these records promptly upon request
of The Funds.
6.3 Reports to The Board of Trustees. CMC shall provide the Board of
Trustees, at such times as it may request, information concerning
CMC's performance under this Agreement, including information as to
costs actually incurred and the volume and nature of shareholder
contacts.
6.4 Service to Others. Nothing contained herein shall limit CMC or any
affiliate from providing services to third parties or to engage in
other business activities.
6.5 Agreement Binding only on Trust Property. CMC understands that the
obligations of this Agreement are not binding on any shareholder of
The Funds personally, but bind only The Funds' property. CMC
represents that it has notice of The Funds' Declaration of Trust
disclaiming shareholder liability for acts and obligations of The
Funds.
6.6 Law and Enforceability. This Agreement shall be construed according to
the laws of the State of Wisconsin and the invalidity or
unenforceability of any provision not affect or impair any other
provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to besigned by their
respective officers, effective the date first above written.
ATTEST: THE AAL MUTUAL FUNDS
/s/ Robert G. Same /s/ John H. Pender
- ----------------------------- ---------------------------------
Robert G. Same, Secretary John H. Pender, President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
/s/ Robert G. Same /s/ H/ Michael Spence
- ----------------------------- ---------------------------------
Robert G. Same, Secretary H. Michael Spence, President
<PAGE>
SHAREHOLDER MAINTENANCE AGREEMENT
SCHEDULE A
(effective April 1, 1995)
The AAL Capital Growth Fund
The AAL Bond Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund'
The AAL U.S. Government Zero Coupon Target Fund, Series 2001
The AAL U.S. Government Zero Coupon Target Fund, Series 2006
The AAL Smaller Company Stock Fund
The AAL Utilities Fund
<PAGE>
EXHIBIT 25(b)(9)(c)
AMENDMENT NO. 4
TO
SHAREHOLDER MAINTENANCE AGREEMENT
The Shareholder Maintenance Agreement between The AAL Mutual Funds and AAL
Capital Management Corporation, as amended, effective January 8, 1997, is hereby
amended, December 29, 1997, as follows:
1. Schedule A, attached to the Shareholder Maintenance Agreement, is
amended to add The AAL Balanced Fund. Schedule A, effective as of
December 29, 1997, is attached hereto.
IN WITNESS WHEREOF the parties have caused this Amendment to be signed by the
respective officers effective December 29, 1997.
ATTEST: THE AAL MUTUAL FUNDS
By: /s/ Robert G. Same By: /s/ Ronald G. Anderson
- ----------------------------- ---------------------------------
Robert G. Same, Secretary Ronald G. Anderson,President
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
By: /s/ Robert G. Same By: /s/ Ronald G. Anderson
- ----------------------------- ---------------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
<PAGE>
SHAREHOLDER MAINTENANCE AGREEMENT
SCHEDULE A
(EFFECTIVE JANUARY 8, 1997)
The AAL Capital Growth Fund
The AAL Bond Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund
The AAL U.S. Government Zero Coupon Target Fund, Series 2001
The AAL U.S. Government Zero Coupon Target Fund, Series 2006
The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)
The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)
The AAL International Fund
The AAL Small Cap Stock Fund
The AAL Balanced Fund
EXHIBIT 24(b)(10)
Opinion and Consent of Counsel for Immediate Effectiveness
485(b) Filing
See Transmittal Letter
EXHIBIT 24 (b)(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
26 to the registration statement on Form N-1A (the "Registration Statement") of
our report dated May 15, 1998, relating to the financial statements and
financial highlights appearing in the April 30, 1998 Annual Report of 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 and
The AAL Money Market Fund (ten of the funds comprising The AAL Mutual Funds),
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the headings "Financial Highlights"
in the Prospectus and under the heading "Other Service Providers" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Milwaukee, Wisconsin
June 23, 1998
THE AAL MUTUAL FUNDS PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
Copyright 1995 AAL Capital Management Corporation
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS 16
2.2 DETERMINATION OF TOP HEAVY STATUS 16
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER 19
2.4 DESIGNATION OF ADMINISTRATOR 20
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 21
2.6 RESPONSIBILITIES OF THE ADMINISTRATOR 21
2.7 RECORDS AND REPORTS 21
2.8 APPOINTMENT OF ADVISERS 21
2.9 INFORMATION FROM EMPLOYER 21
2.10 PAYMENT OF FEES AND EXPENSES 22
2.11 MAJORITY ACTIONS 22
2.12 CLAIMS PROCEDURE 22
2.13 CLAIMS REVIEW PROCEDURE 22
2.14 ADMINISTRATOR INDEMNIFICATION 23
<PAGE>
ARTICLE III
ELIGIBILITY
3.1 COMMENCEMENT OF ACTIVE PARTICIPATION 24
3.2 DETERMINATION OF ACTIVE PARTICIPATION 24
3.3 DURATION OF ACTIVE PARTICIPATION 24
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 DETERMINATION OF EMPLOYER'S CONTRIBUTION 25
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 26
4.3 ALLOCATION OF CONTRIBUTIONS, FORFEITURES AND EARNINGS 26
4.4 MAXIMUM ANNUAL ADDITIONS 31
4.5 TRANSFERS FROM QUALIFIED PLANS 38
4.6 VOLUNTARY CONTRIBUTIONS 40
4.7 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS 40
4.8 MANDATORY EMPLOYEE CONTRIBUTIONS 41
4.9 OVERALL PERMITTED DISPARITY LIMITS 41
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND 43
<PAGE>
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT 44
6.2 DETERMINATION OF BENEFITS UPON DEATH 44
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 45
6.4 DETERMINATION OF BENEFITS UPON TERMINATION 45
6.5 DISTRIBUTION OF BENEFITS 47
6.6 DISTRIBUTION OF BENEFITS UPON DEATH 53
6.7 TIME OF DISTRIBUTION 59
6.8 DISTRIBUTION TO INCOMPETENTS 59
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 59
6.10 IN-SERVICE DISTRIBUTIONS 60
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP 60
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS 61
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS 61
6.14 DIRECT ROLLOVERS 62
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 63
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 63
7.3 OTHER POWERS OF THE TRUSTEE 63
7.4 PARTICIPANT DIRECTION OF INVESTMENTS 65
7.5 LOANS TO PARTICIPANTS 65
7.6 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 68
7.7 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 68
7.8 ANNUAL REPORT OF THE TRUSTEE 68
7.9 AUDIT 69
7.10 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 69
7.11 TRANSFER OF INTEREST 70
7.12 TRUSTEE INDEMNIFICATION 70
7.13 ALLOCATION AND DELEGATION OF RESPONSIBILITIES 71
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT 72
8.2 TERMINATION 73
8.3 MERGER OR CONSOLIDATION 73
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS 74
9.2 PARTICIPANT'S RIGHTS 74
9.3 ALIENATION 74
9.4 CONSTRUCTION OF PLAN 75
9.5 GENDER AND NUMBER 75
9.6 LEGAL ACTION 75
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS 75
9.8 BONDING 76
9.9 EMPLOYER'S, ADMINISTRATOR'S AND TRUSTEE'S PROTECTIVE CLAUSE 76
9.10 INSURANCE COMPANY PROTECTIVE CLAUSE 77
9.11 RECEIPT AND RELEASE FOR PAYMENTS 77
9.12 ACTION BY THE EMPLOYER 77
9.13 HEADINGS 77
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 77
9.15 UNIFORMITY 77
9.16 OWNER EMPLOYEES 78
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER 79
10.2 SINGLE TRUST FUND 79
10.3 DESIGNATION OF AGENT 79
10.4 EMPLOYEE TRANSFERS 79
10.5 PARTICIPATING EMPLOYER CONTRIBUTIONS AND FORFEITURES 79
10.6 PLAN EXPENSES 79
10.7 AMENDMENT 79
10.8 DISCONTINUANCE OF PARTICIPATION 79
10.9 EMPLOYER'S AUTHORITY 80
ARTICLE XI
CASH OR DEFERRED PROVISIONS
11.1 DETERMINATION OF EMPLOYER'S CONTRIBUTION 81
11.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 81
11.3 PARTICIPANT'S DEFERRAL ELECTION 82
11.4 ALLOCATION OF CONTRIBUTION AND FORFEITURES 85
11.5 ACTUAL DEFERRAL PERCENTAGE TESTS 88
11.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 90
11.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS 93
11.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS 95
11.9 ADVANCE DISTRIBUTION FOR HARDSHIP 97
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Plan, the following words and phrases shall
have the meanings set forth herein unless a different meaning is clearly
required by the context:
1.1 "Account" or "Accounts" means the record established and maintained by
the Administrator for each Participant to reflect his allocable portion of the
Trust Fund derived from Employer and Employee contributions to the Plan.
1.2 "Accrued Benefit" means, with respect to each Participant, the value of
all Accounts maintained on his behalf.
1.3 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.4 "Active Participant" means an Eligible Employee described in Section
3.1.
1.5 "Actual Contribution Percentage" means the percentage determined under
Section 11.7(b). "Actual Contribution Ratio" means the ratio determined under
Section 11.7(b).
1.6 "Actual Deferral Percentage" means the percentage determined under
Section 11.5(b). "Actual Deferral Ratio" means the ratio determined under
Section 11.5(b).
1.7 "Administrator" means the person or persons designated by the Employer
pursuant to Section 2.4.
1.8 "Adoption Agreement" means the separate Agreement which is executed by
the Employer and accepted by the Trustee and which sets forth the elective
provisions of the Plan as specified by the Employer.
1.9 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.10 "Alternate Payee" means any spouse, former spouse, child or other
dependent of a Participant who is recognized by a Domestic Relations Order as
having a right to receive all, or a portion of, the Participant's Accrued
Benefit.
1.11 "Anniversary Date" means the date specified in the Adoption Agreement.
<PAGE>
1.12 "Annuity Starting Date" means the first day of the first period for
which an amount is paid as an annuity or any other form.
1.13 "Beneficiary" means the person to whom a share of a deceased
Participant's Accrued Benefit is payable pursuant to the provisions of Sections
6.2 and 6.6.
1.14 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.15 "Compensation" means, with respect to any Employee, the 415
Compensation that is actually paid to him during the Plan Year or, in the case
of a Profit Sharing Plan or Money Purchase Plan, during the period specified in
the Adoption Agreement. If specified in the Adoption Agreement, Compensation
shall also include amounts which are not currently includible in the Employee's
gross income by reason of Code Section 125, 402(e)(3), 402(h)(1)(B), or 403(b).
For any Self-Employed Individual, Compensation shall mean his Earned Income.
Unless otherwise provided in the Adoption Agreement, Compensation shall include
only 415 Compensation paid while an Employee is an Active Participant.
The annual Compensation of each Participant taken into account under the
Plan for any Plan Year or such other period specified in the Adoption Agreement
shall not exceed $150,000, as adjusted for increases in the cost-of-living in
accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any Plan Year or such other period
beginning in such calendar year. If a Plan Year or such other period consists of
fewer than twelve months the $150,000 limitation (as adjusted) is an amount
equal to the $150,000 limitation (as adjusted) multiplied by a fraction, the
numerator of which is the number of months in the short Plan Year or such other
period and the denominator of which is twelve.
In applying this limitation, a Highly Compensated Employee and any Family
Members of such Highly Compensated Employee shall be treated as a single Highly
Compensated Employee, except that, for this purpose, Family Members shall
include only the Highly Compensated Employee's spouse and any lineal descendants
who have not attained age nineteen before the close of the Plan Year. If the
Compensation of the Employees treated as a single Highly Compensated Employee
exceeds the $150,000 limitation, as adjusted, then such limitation shall be
prorated among the affected Employees in proportion to each such Employee's
Compensation as determined under this Section 1.15 prior to the application of
the immediately preceding paragraph. If, pursuant to the provisions of the
immediately preceding sentence, the amount allocated to an Employee is less than
the amount that would otherwise have been allocated to him if he and the other
affected Employees were not treated as a single Highly Compensated Employee,
then the $150,000 limitation shall be divided among the affected Employees in
such a way as to maximize the amount allocable to each affected Employee.
1.16 "Deferred Compensation" means, with respect to any Active Participant,
that portion of the Active Participant's Compensation which has been contributed
to the Plan in accordance with his deferral election pursuant to Section 11.3.
<PAGE>
1.17 "Determination Date" means, for any Plan Year, the last day of the
preceding Plan Year or, in the case of the first Plan Year, the last day of such
Plan Year. For purposes of Section 2.2, "Determination Date" also means any such
day for any other plan of the Employer or an Affiliated Employer which is taken
into account in determining whether this Plan is a Top Heavy Plan or Super Top
Heavy Plan.
1.18 "Determination Year" means the Plan Year with respect to which a
determination of Highly Compensated Employees is being made pursuant to Section
1.40.
1.19 "Discretionary Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 11.1(a)(3) and which
are not used to satisfy the Actual Deferral Percentage test or the Actual
Contribution Percentage test. "Discretionary Non-Elective Account" means the
Account to which Discretionary Non-Elective Contributions are allocated.
1.20 "Domestic Relations Order" means any judgement, decree or order
(including approval of a property settlement agreement) which relates to the
provision of child support, alimony payments, or marital property rights to an
Alternate Payee and which is made pursuant to a State domestic relations law
(including a community property law).
1.21 "Early Retirement" means a Participant's termination of employment
occurring on or after the date the Participant has satisfied the age and service
requirements specified in the Adoption Agreement and occurring before he has
attained Normal Retirement Age. A Participant shall become fully Vested in his
Accrued Benefit upon satisfying the requirements for Early Retirement.
Notwithstanding any selection in the Adoption Agreement to the contrary, a
Participant who terminates employment after satisfying the service requirement,
if any, for Early Retirement and who thereafter satisfies the age requirement
for Early Retirement shall be entitled to receive his Accrued Benefit at any
time after satisfying such age requirement.
1.22 "Earned Income" means, with respect to a Self-Employed Individual, the
net earnings from self-employment in the trade or business with respect to which
the Plan is established, for which the personal services of the Self-Employed
Individual are a material income-producing factor. Net earnings will be
determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan to the extent deductible under Code Section
404. In addition, net earnings shall be determined with regard to the deduction
allowed to the taxpayer by Code Section 164(f).
1.23 "Elective Contribution" means the Employer's contributions to the Plan
that are made pursuant to an Active Participant's deferral election under
Section 11.3. "Elective Account" means the Account to which Elective
Contributions are allocated.
1.24 "Eligible Employee" means any Employee specified in the Adoption
Agreement who is eligible to become an Active Participant.
<PAGE>
1.25 "Employee" means any individual employed by the Employer maintaining
the Plan or any other Affiliated Employer required to be aggregated with the
Employer under Code Sections 414(b), (c), (m) and (o). The term "Employee" shall
also include any Leased Employee deemed to be an Employee of any Employer or
Affiliated Employer described in the immediately preceding sentence as provided
in Code Sections 414(n) and (o).
1.26 "Employer" means the entity specified in the Adoption Agreement, any
Participating Employer which shall adopt this Plan, any successor which shall
maintain this Plan and any predecessor which has maintained this Plan.
1.27 "Employer Contribution Account" means the Account to which, in the
case of a Profit Sharing Plan or Money Purchase Plan, the Employer's
contributions are allocated.
1.28 "Excess Aggregate Contributions" means, with respect to a Plan Year,
the amount by which Matching Contributions, voluntary Employee contributions
made pursuant to Section 4.6 and Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.6(a)(2) (and, if
applicable, Elective Contributions and Qualified Non-Elective Contributions
treated as Matching Contributions) made on behalf of Active Participants who are
Highly Compensated Employees exceeds the amount of such contributions permitted
under Section 11.7(a).
1.29 "Excess Compensation" means, with respect to a Plan that is integrated
with Social Security, a Participant's Compensation which is in excess of the
integration level specified in the Adoption Agreement.
1.30 "Excess Contributions" means, with respect to a Plan Year, the amount
by which Elective Contributions, (and, if applicable, Qualified Matching
Contributions and Qualified Non-Elective Contributions treated as Elective
Contributions) made on behalf of Active Participants who are Highly Compensated
Employees exceeds the amount of such contributions permitted under Section
11.5(a).
1.31 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the amount by which such Active Participant's Deferred
Compensation and any other elective deferrals pursuant to Section 11.3 actually
made on behalf of such Active Participant for such taxable year exceeds the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference.
1.32 "Family Member" means an Employee, who during the Determination Year
or Look-Back Year, is the spouse or lineal descendant or ascendant (or the
spouse thereof of either) of either a Five Percent Owner who is an active or
former Employee or one of the ten Highly Compensated Employees paid the greatest
415 Compensation. For purposes of this Section 1.32, the determination of 415
Compensation shall be made by including amounts that would otherwise be excluded
from gross income by reason of Code Sections 125, 402(e)(3), 402(h)(1)(B) and,
in the case of Employer contributions made pursuant to a salary reduction
agreement, Code Section 403(b).
<PAGE>
1.33 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan.
1.34 "Fiscal Year" means the Employer's accounting year as specified in the
Adoption Agreement.
1.35 "Five Percent Owner" means any individual who owns (or is considered
as owning within the meaning of Code Section 318) more than five percent of the
outstanding stock of the Employer or an Affiliated Employer or stock possessing
more than five percent of the total combined voting power of all stock of the
Employer or an Affiliated Employer or, in the case of an unincorporated
business, any individual who owns more than five percent of the capital or
profits interest in the Employer or an Affiliated Employer. In determining
percentage ownership hereunder, the Employer or any Affiliated Employer shall
not be treated as having Affiliated Employers.
1.36 "Fixed Non-Elective Contribution" means the Employer's contributions
to the Plan that are made pursuant to Section 11.1(a)(4) and which are not used
to satisfy the Actual Deferral Percentage test or the Actual Contribution
Percentage test. "Fixed Non-Elective Account" means the Account to which Fixed
Non-Elective Contributions are allocated.
1.37 "Forfeiture" means that portion of a Participant's Accrued Benefit
that is not Vested and which occurs on the earlier of:
(a) the distribution of the Participant's Vested Accrued Benefit, or
(b) the last day of the Plan Year in which the Participant incurs five
consecutive 1-Year Breaks in Service.
For purposes of Section 1.37(a), in the case of a Participant whose Vested
Accrued Benefit is zero, such Participant shall be deemed to have received a
distribution of his Vested Accrued Benefit upon his termination of employment.
In addition, the term Forfeiture shall also include amounts deemed to be
Forfeitures pursuant to any other provision of this Plan.
1.38 "414(s) Compensation" means, with respect to any Employee, the 415
Compensation paid to him during a Plan Year, except that, for any Plan Year, the
Employer may elect to take into account only 415 Compensation paid while an
Employee is an Active Participant. Any such election must apply, on a uniform
and consistent basis, to all Employees who are Active Participants during such
Plan Year.
In addition, if specified in the Adoption Agreement, 414(s) Compensation
shall also include amounts which are not currently includible in the
Participant's gross income by reason of Code Section 125, 402(e)(3),
402(h)(1)(B), or 403(b).
<PAGE>
The annual 414(s) Compensation of each Participant for any Plan Year shall
not exceed $150,000, as adjusted for increases in the cost-of-living in
accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any Plan Year beginning in such calendar
year. If a Plan Year consists of fewer than twelve months the $150,000
limitation (as adjusted) is an amount equal to the $150,000 limitation (as
adjusted) multiplied by a fraction, the numerator of which is the number of
months in the short determination period, and the denominator of which is
twelve.
In applying this limitation, a Highly Compensated Employee and any Family
Members of such Highly Compensated Employee shall be treated as a single Highly
Compensated Employee, except that, for this purpose, Family Members shall
include only the Highly Compensated Employee's spouse and any lineal descendants
who have not attained age nineteen before the close of the Plan Year. If the
414(s) Compensation of the Employees treated as a single Highly Compensated
Employee exceeds the $150,000 limitation, as adjusted, then such limitation
shall be prorated among the affected Employees in proportion to each such
Employee's 414(s) Compensation as determined under this Section 1.38 prior to
the application of the immediately preceding paragraph.
1.39 "415 Compensation" means the amounts described in Section 4.4(f)(2).
1.40 "Highly Compensated Employee" means an Employee who performs services
for the Employer or an Affiliated Employer or both during the Determination Year
and is in one or more of the following groups:
(a) Employees who at any time during the Determination Year or
Look-Back Year were Five Percent Owners.
(b) Employees who received 415 Compensation during the Look-Back Year
from the Employer or Affiliated Employer or both in excess of $75,000.
(c) Employees who received 415 Compensation during the Look-Back Year
from the Employer or Affiliated Employer or both in excess of $50,000 and
were in the Top Paid Group of Employees for the Look-Back Year.
(d) Employees who during the Look-Back Year were officers of the
Employer or Affiliated Employer or both (as that term is defined within the
meaning of the Regulations under Code Section 416) and received 415
Compensation during the Look-Back Year from the Employer or Affiliated
Employer or both which was greater than fifty percent of the limit in
effect under Code Section 415(b)(1)(A) for the calendar year in which such
Look-Back Year begins. The number of officers shall be limited to the
lesser of (i) fifty Employees or (ii) the greater of three Employees or ten
percent of all Employees. If there is no officer whose 415 Compensation is
in excess of fifty percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer or Affiliated Employer or both will be
treated as a Highly Compensated Employee.
<PAGE>
(e) Employees who are in the group consisting of the 100 Employees
paid the greatest 415 Compensation during the Determination Year and are
also described in Section 1.40(b), (c) or (d) when each such Section is
modified to substitute Determination Year for Look-Back Year.
For purposes of this Section 1.40, the determination of 415 Compensation
shall be made by including amounts that would otherwise be excluded from an
Employee's gross income by reason of Code Sections 125, 402(e)(3), 402(h)(1)(B)
and, in the case of Employer contributions made pursuant to a salary reduction
agreement, Code Section 403(b). Additionally, the dollar threshold amounts
specified in Sections 1.40(b) and (c) shall be adjusted at such time and in such
manner as is provided in Regulations. In the case of such an adjustment, the
dollar threshold amounts applicable are those for the calendar year in which the
Determination Year or Look Back Year begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who receive no earned income (within the meaning of Code
Section 911(d)) from the Employer or Affiliated Employer or both constituting
United States source income within the meaning of Code Section 861(a)(3) shall
not be treated as Employees. Additionally, Leased Employees shall be considered
Employees for purposes of this Section 1.40 unless such Leased Employees are
covered by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer or any Affiliated Employer. Also, a
Highly Compensated Employee and any Family Members shall be treated as a single
Highly Compensated Employee receiving Compensation and contributions under the
Plan equal to the sum of such Compensation and contributions of the Highly
Compensated Employee and any Family Members. Finally, Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the Determination Year.
1.41 "Highly Compensated Former Employee" means a former Employee who had a
separation year (as that term is defined within the meaning of Regulations under
Code Section 414(q)) prior to the Determination Year and was a Highly
Compensated Employee in the Determination Year in which he terminated employment
or in any Determination Year ending on or after attaining age fifty-five.
Notwithstanding the foregoing, an Employee who separated from service prior to
1987 will be treated as a Highly Compensated Former Employee only if during the
separation year (or the year preceding the separation year) or any Determination
Year ending on or after the Employee attains age fifty-five (or the last
Determination Year ending before the Employee's fifty-fifth birthday), the
Employee either received 415 Compensation in excess of $50,000 or was a Five
Percent Owner.
1.42 "Hour of Service" means (a) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (b) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (c) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. The same Hours of Service shall not be credited both
under (a) or (b), as the case may be, and under (c).
<PAGE>
Notwithstanding the above, no more than 501 Hours of Service are required
to be credited to an Employee on account of any single continuous period during
which the Employee performs no duties (whether or not such period occurs in a
single computation period). An hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation or unemployment compensation or
disability insurance laws. Hours of Service are not required to be credited for
a payment which solely reimburses an Employee for medical or medically related
expenses incurred by the Employee.
For purposes of this Section 1.42, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund or
insurer, to which the Employer contributes or pays premiums, and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
Hours of Service will be credited for employment with other members of an
affiliated service group (under Code Section 414(m)), a controlled group of
corporations (under Code Section 414(b)), or a group of trades or businesses
under common control (under Code Section 414(c)) of which the Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o) and the regulations thereunder.
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Code Sections 414(n) and (o) and the
regulations thereunder.
Hours of Service will be determined on the basis of the method selected in
the Adoption Agreement. The provisions of Department of Labor regulations
2530.200b-2 are incorporated herein by reference.
1.43 "Joint and Survivor Annuity" means, in the case of a married
Participant, an annuity for the life of a Participant with a survivor annuity
for the life of the Participant's spouse which is not less than fifty percent,
nor greater than 100% of the amount of the annuity payable during the joint
lives of the Participant and the Participant's spouse. In the case of an
unmarried Participant, "Joint and Survivor Annuity" means a straight life
annuity which is an annuity payable in equal installments for the life of the
Participant and that terminates upon the Participant's death. The amount of the
Joint and Survivor Annuity will be the amount of benefit which can be purchased
with the Participant's Vested Accrued Benefit under the Plan.
1.44 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the Determination Date or any of the
preceding four Plan Years, has been included in one of the following categories:
(a) An officer of the Employer or an Affiliated Employer or both (as
that term is defined within the meaning of the Regulations under Code
Section 416) having annual 415 Compensation greater than fifty percent of
the amount in effect under Code Section 415(b)(1)(A) for the calendar year
in which such Plan Year ends.
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(b) One of the ten Employees having annual 415 Compensation from the
Employer or Affiliated Employer or both for a Plan Year greater than the
dollar limitation in effect under Code Section 415(c)(1)(A) for the
calendar year in which such Plan Year ends and owning (or considered as
owning within the meaning of Code Section 318) both more than a one-half
percent interest and the largest interests in the Employer or an Affiliated
Employer. In determining percentage ownership hereunder, the Employer or
any Affiliated Employer shall not be treated as having Affiliated
Employers.
(c) A Five Percent Owner.
(d) A one percent owner of the Employer having annual 415 Compensation
from the Employer or Affiliated Employer or both of more than $150,000. The
term "one percent owner" means any individual who owns (or is considered as
owning within the meaning of Code Section 318) more than one percent of the
outstanding stock of the Employer or an Affiliated Employer or stock
possessing more than one percent of the total combined voting power of all
stock of the Employer or an Affiliated Employer or, in the case of an
unincorporated business, any individual who owns more than one percent of
the capital or profits interest in the Employer or an Affiliated Employer.
In determining percentage ownership hereunder, the Employer or any
Affiliated Employers shall not be treated as having Affiliated Employers.
For purposes of this Section 1.44, the determination of 415 Compensation
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(e)(3), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, Code Section 403(b).
1.45 "Leased Employee" means any individual (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer.
A Leased Employee shall not be considered an employee of the recipient if:
(a) such employee is covered by a money purchase pension plan providing: (i) a
nonintegrated employer contribution rate of at least ten percent of
compensation, as defined in Code Section 415(c)(3), but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the employee's gross income under Code Section 125, 402(e)(3), 402(h)(1)(B) or
403(b), (ii) immediate participation, and (iii) full and immediate vesting; and
(b) Leased Employees do not constitute more than 20 percent of the recipients's
nonhighly compensated work force.
1.46 "Look-Back Year" means the twelve-month period immediately preceding
the Determination Year.
<PAGE>
1.47 "Matching Contribution" means the Employer's contributions to the Plan
that are made pursuant to Section 11.1(a)(2) and which are not used to satisfy
the Actual Deferral Percentage test. "Matching Account" means the Account to
which Matching Contributions are allocated.
1.48 "Maximum Excess Percentage" means the greater of five and seven-tenths
percent or the percentage equal to the portion of the rate of tax under Code
Section 3111(a) in effect at the beginning of the Plan Year or, in the case of a
Profit Sharing Plan or Money Purchase Plan, at the beginning of the period
specified in the Adoption Agreement for determining a Year of Service for
purposes of entitlement to an allocation; provided, however, that if the
integration level specified in the Adoption Agreement is less than the Taxable
Wage Base in effect at the beginning of the Plan Year or such other period, the
Maximum Excess Percentage will be determined according to the table below:
Integration Level Maximum Excess Percentage
Less than the Taxable Wage 5.4%
Base but greater than
eighty percent of the
Taxable Wage Base
Not greater than eighty 4.3%
percent of the Taxable
Wage Base but greater than
twenty percent of the
Taxable Wage Base
Not greater than twenty 5.7%
percent of the Taxable
Wage Base
Notwithstanding the foregoing to the contrary, the Employer may specify in
the Adoption Agreement a Maximum Excess Percentage that is less than the Maximum
Excess Percentage determined under this Section 1.48.
1.49 "Net Profit" means, with respect to any Fiscal Year, the Employer's
net income or profit for such Fiscal Year determined upon the basis of the
Employer's books of account in accordance with generally accepted accounting
principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan or any other qualified plan.
1.50 "Non-Elective Accounts" means a Participant's Fixed Non-Elective
Account, Discretionary Non-Elective Account and Qualified Non-Elective Account.
1.51 "Non-Highly Compensated Employee" means any Employee who is not a
Highly Compensated Employee.
1.52 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.53 "Normal Retirement Age" means the time specified in the Adoption
Agreement when a Participant shall become fully Vested in his Accrued Benefit.
If the Employer enforces a mandatory retirement age, the Normal Retirement Age
is such mandatory retirement age if it occurs earlier than the time specified in
the Adoption Agreement.
<PAGE>
1.54 "Normal Retirement" means a Participant's termination of employment
occurring on or after his attainment of Normal Retirement Age.
1.55 "1-Year Break in Service" means the period specified in the Adoption
Agreement for determining a Year of Service for vesting purposes during which an
Employee has not completed more than 500 Hours of Service or such lesser number
of Hours of Service as specified by the Employer in the Adoption Agreement.
Further, solely for the purpose of determining whether an Employee has incurred
a 1-Year Break in Service, Hours of Service shall be recognized for authorized
leaves of absence and maternity and paternity leaves of absence. The term
"authorized leave of absence" means an unpaid, temporary cessation from active
employment with the Employer or any Affiliated Employer pursuant to an
established nondiscriminatory policy, whether occasioned by illness, military
service, or any other reason. The term "maternity or paternity leave of absence"
means, for Plan Years beginning after December 31, 1984, an absence from work
for any period by reason of the Employee's pregnancy, birth of the Employee's
child, placement of a child with the Employee in connection with the adoption of
such child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the Plan Year in which the absence from work
begins only if credit therefor is necessary to prevent the Employee from
incurring a 1-Year Break in Service or, in any other case, in the immediately
following Plan Year. The Hours of Service credited for a maternity or paternity
leave of absence shall be those which would normally have been credited but for
such absence or, in any case in which the Administrator is unable to determine
such hours normally credited, eight Hours of Service per day. The total Hours of
Service required to be credited for a maternity or paternity leave of absence
shall not exceed 501.
1.56 "Owner-Employee" means a sole proprietor who owns the entire interest
in the Employer or a partner who owns more than ten percent of either the
capital interest or the profits interest in the Employer and who receives income
for personal services from the Employer.
1.57 "Paired Plans" means the Employer has adopted two or more of the
following Standardized Adoption Agreements: (a) Profit Sharing Plan (Paired Plan
#03-001), (b) Money Purchase Plan (Paired Plan #03-002) and (c) 401(k) Profit
Sharing Plan (Paired Plan #03-003).
1.58 "Participant" means any individual who is an Active Participant or who
has an Accrued Benefit under the Plan.
1.59 "Participating Employer" means any entity which shall adopt this Plan
pursuant to the provisions of Article X.
1.60 "Plan" means this instrument (hereinafter referred to as The AAL
Mutual Funds Prototype Defined Contribution Plan and Trust Basic Plan Document
#01), including all amendments thereto, and the Adoption Agreement as adopted by
the Employer.
1.61 "Plan Year" means the twelve consecutive month period as specified in
the Adoption Agreement.
1.62 "Pre-Retirement Survivor Annuity" means an immediate annuity for the
life of the Participant's spouse, the value of which must be equal to fifty
percent of the Participant's Accrued Benefit under the Plan as of the date of
death.
<PAGE>
1.63 "Qualified Domestic Relations Order" means a Domestic Relations Order
which meets the requirements of the following paragraphs:
(a) The Domestic Relations Order creates or recognizes the existence
of an Alternate Payee's right to, or assigns to an Alternate Payee the
right to, receive all or a portion of a Participant's Accrued Benefit under
the Plan.
(b) The Domestic Relations Order clearly specifies the facts described
in the following subparagraphs:
(1) The name and last known mailing address, if any, of the
Participant and the name and mailing address of each Alternate Payee
covered by the Domestic Relations Order;
(2) The amount or percentage of the Participant's Accrued Benefit
to be paid by the Plan to each Alternate Payee, or the manner in which
such amount or percentage is to be determined;
(3) The number of payments or period to which the Domestic
Relations Order applies; and
(4) The plans (including this Plan) to which the Domestic
Relations Order applies.
(c) The Domestic Relations Order does not contain any of the
provisions described in the following subparagraphs:
(1) Except as provided in Section 6.12, any type or form of
benefit, or any option, which is not otherwise provided for under the
Plan;
(2) The payment of benefits to an Alternate Payee that have a
value exceeding the Participant's Vested Accrued Benefit.
(3) The payment of benefits to an Alternate Payee if such
benefits are required to be paid to another Alternate Payee under
another Domestic Relations Order which has previously been determined
to be a Qualified Domestic Relations Order.
1.64 "Qualified Matching Contribution" means Matching Contributions which
are used to satisfy the Actual Deferral Percentage test. Qualified Matching
Contributions are nonforfeitable when made and are distributable only as
specified in Sections 11.3(e) and 11.9. "Qualified Matching Account" means the
Account to which Qualified Matching Contributions are allocated. A Participant's
Qualified Matching Account shall be fully vested and shall not be subject to
Forfeiture for any reason other than Section 6.9.
<PAGE>
1.65 "Qualified Non-Elective Contribution" means Fixed Non-Elective
Contributions which are used to satisfy the Actual Deferral Percentage test or
the Actual Contribution Percentage test. Qualified Non-Elective Contributions
are nonforfeitable when made and are distributable only as specified in Sections
11.3(e) and 11.9. In addition, the Employer's contributions to the Plan that are
made pursuant to Sections 11.6(b) and 11.8(g) and which are used to satisfy the
Actual Deferral Percentage test or the Actual Contribution Percentage test shall
be considered Qualified Non-Elective Contributions. "Qualified Non-Elective
Account" means the Account to which Qualified Non-Elective Contributions are
allocated. A Participant's Qualified Non-Elective Account shall be fully vested
at all times and shall not be subject to Forfeiture for any reason other than
Section 6.9.
1.66 "Qualified Voluntary Employee Contribution Account" means the Account
to which a Participant's tax deductible qualified voluntary employee
contributions made pursuant to Section 4.7 have been allocated.
1.67 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.68 "Rollover Account" means the Account to which amounts transferred from
another qualified plan or individual retirement account are allocated in
accordance with Section 4.5.
1.69 "Self-Employed Individual" means an individual who has Earned Income
for the taxable year from the trade or business with respect to which the Plan
is established and, also, an individual who would have had Earned Income but for
the fact that the trade or business has no Net Profits for the taxable year. A
Self-Employed Individual shall be treated as an Employee.
1.70 "Shareholder-Employee" means an Employee who owns more than five
percent of the Employer's outstanding capital stock during any Fiscal Year in
which the Employer elected to be taxed as a small business corporation under
Subchapter S of the Code.
1.71 "Super Top Heavy Plan" means a plan described in Section 2.2(a).
1.72 "Taxable Wage Base" means, with respect to any Plan Year or other
period specified in the Adoption Agreement, the contribution and benefit base
under Section 230 of the Social Security Act at the beginning of such Plan Year
or other period.
1.73 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.74 "Top Heavy Plan Year" means a Plan Year commencing after December 31,
1983, during which the Plan is a Top Heavy Plan.
<PAGE>
1.75 "Top Paid Group" means the top twenty percent of Employees who
performed services for the Employer or any Affiliated Employer or both during
the Determination Year or Look-Back Year, as the case may be, ranked according
to the amount of 415 Compensation (as determined pursuant to Section 1.40)
received from the Employer or any Affiliated Employer or both during such
Determination or Look-Back Year. All Leased Employees shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer or any Affiliated Employer. Employees who are non-resident aliens and
who receive no earned income (within the meaning of Code Section 911(d)(2))
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of Employees in the Determination Year or Look-Back Year,
the following additional Employees shall also be excluded; however, such
Employees shall still be considered for the purpose of identifying the
particular Employees in the Top Paid Group:
(a) Employees who have not been employed for six months by the
end of such year;
(b) Employees who normally work less than seventeen and one-half
hours per week for such year;
(c) Employees who normally work less than seven months during
such year; and
(d) Employees who have not attained age twenty-one by the end of such
year.
In addition, if ninety percent or more of the Employees of the Employer and
any Affiliated Employers are covered under agreements the Secretary of Labor
finds to be collective bargaining agreements between Employee representatives
and the Employer or any Affiliated Employer or both, and the Plan covers only
Employees who are not covered under such agreements, then Employees covered by
such agreements shall be excluded from both the total number of Employees and
from the identification of particular Employees in the Top Paid Group.
The Employer may elect to modify Sections 1.75(a) through (d) by
substituting any shorter period of service or lower age than that specified
therein. The Employer may also elect to disregard the provisions of the
immediately preceding paragraph relating to Employees covered under collective
bargaining agreements. Any such elections must be made on a consistent and
uniform basis and must apply to all qualified retirement benefit plans and
employee benefit plans maintained by the Employer or any Affiliated Employer or
both with respect to which the definition of Highly Compensated Employee is
applicable.
1.76 "Total and Permanent Disability" means the inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve months.
The disability of a Participant shall be determined by a licensed physician
chosen by the Employer. However, if the condition constitutes total disability
under the Social Security Act, the Employer may rely upon such determination
that the Participant is Totally and Permanently Disabled for the purposes of
this Plan. The determination of Total and Permanent Disability shall be applied
uniformly to all Participants.
<PAGE>
1.77 "Trustee" means the person or persons named in the Adoption Agreement
and any successors.
1.78 "Trust Fund" means the fund maintained by the Trustee for the
investment of Plan assets.
1.79 "Valuation Date" means the Anniversary Date and such other date or
dates deemed necessary by the Employer for the purpose of valuing the Trust
Fund. The selection by the Employer of a Valuation Date other than the
Anniversary Date shall be made only if the use of such Valuation Date will not
result in discrimination in favor of Highly Compensated Employees.
1.80 "Vested" means the nonforfeitable portion of a Participant's Accrued
Benefit or any of his Accounts.
1.81 "Voluntary Contribution Account" means the Account to which a
Participant's nondeductible voluntary contributions made pursuant to Section 4.6
are allocated.
1.82 "Year of Service" means the computation period of twelve consecutive
months herein set forth and during which an Employee has completed the number of
Hours of Service specified in the Adoption Agreement.
For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service (employment commencement date). Each subsequent computation period shall
begin, as specified in the Adoption Agreement, on the anniversary of the
Employee's employment commencement date or on the first day of the Plan Year
beginning with the Plan Year which includes the first anniversary of his
employment commencement date.
For purposes of vesting, the computation period shall be the Plan Year or,
in the case of the Profit Sharing Plan or Money Purchase Plan, any other
twelve-month period specified in the Adoption Agreement. If there is a change in
the computation period, the twelve-month period ending on the day immediately
preceding the first day of the new computation period shall also be considered a
computation period.
For purposes of determining a Participant's entitlement to an allocation
under Section 4.3, the computation period shall be the Plan Year or, in the case
of the Profit Sharing Plan or Money Purchase Plan, any other twelve-month period
specified in the Adoption Agreement. If a computation period is less than twelve
months, the determination of whether an Employee has completed a Year of Service
for purposes of entitlement to an allocation shall be proportionately reduced
based on the number of days in the short computation period.
Years of Service with any predecessor employer which maintained this Plan
shall be recognized. Years of Service with any other employer shall be
recognized as specified in the Adoption Agreement.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4(c) of the Plan and
the special minimum contribution requirements of Code Section 416(c) pursuant to
Section 4.3(d).
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date, the
Aggregate Accounts of Key Employees under this Plan exceed sixty percent of
the Aggregate Accounts of all Key and Non-Key Employees under this Plan.
This Plan shall be a Super Top Heavy Plan for any Plan Year beginning after
December 31, 1983, in which, as of the Determination Date, the Aggregate
Accounts of Key Employees under this Plan exceed ninety percent of the
Aggregate Accounts of all Key and Non-Key Employees under this Plan. This
Plan shall also be a Top Heavy Plan or Super Top Heavy Plan if this Plan is
part of an Aggregation Group which is a Top Heavy Group or a Super Top
Heavy Group.
(b) If any Employee is a Non-Key Employee for any Plan Year, but was a
Key Employee for any prior Plan Year, such Employee's Present Value of
Accrued Benefit and Aggregate Account shall not be taken into account for
the purpose of determining whether this Plan is a Top Heavy Plan or a Super
Top Heavy Plan. In addition, if an Employee has not performed any services
for the Employer or any Affiliated Employer at any time during the five
year period ending on the Determination Date, the Present Value of Accrued
Benefit and Aggregate Account of such Employee shall not be taken into
account for the purpose of determining whether this Plan is a Top Heavy
Plan or a Super Top Heavy Plan.
(c) An Employee's Aggregate Account as of any Determination Date shall
be the value of his accounts under all defined contribution plans
(including this Plan) maintained by the Employer or any Affiliated Employer
as of the most recent valuation date occurring within the twelve month
period ending on the Determination Date adjusted as follows:
(1) An Employee's accounts shall be reduced by any amount
attributable to qualified voluntary employee contributions;
(2) An Employee's accounts shall be increased by any
contributions due as of the Determination Date. In the case of a plan
not subject to Code Section 412, the amount of contributions due as of
a Determination Date shall be the amount of any contributions actually
made after the valuation date but before the Determination Date,
except for the first Plan Year when the amount of contributions due as
of a Determination Date shall include the amount of
<PAGE>
any contributions made after the Determination Date that are allocated
as of a date in that first Plan Year. In the case of a plan subject to
Code Section 412, the amount of contributions due as of a
Determination Date shall include contributions that would be allocated
as of a date not later than the Determination Date, even though such
contributions are not yet made or required to be made.
(3) An Employee's accounts shall be increased by any
distributions made within a plan year that includes the Determination
Date or within the four preceding plan years. However, in the case of
distributions made after a valuation date and prior to the
Determination Date, such distributions are not taken into account to
the extent that such distributions are already reflected in the value
of an Employee's account as of the valuation date. In the case of a
distribution of an annuity contract, the amount of such distribution
is deemed to be the current actuarial value of the contract,
determined on the date of its distribution. All distributions,
including distributions made prior to plan years beginning on or after
January 1, 1984, and distributions under a terminated plan which if it
had not been terminated would have been required to be included in an
Aggregation Group, will also be taken into account.
(4) With respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by an Employee and made from
a plan maintained by one employer to a plan maintained by another
employer), in the case of the transferor plan, such rollovers or
plan-to-plan transfers shall be treated as distributions for purposes
of this Section 2.2. In the case of the transferee plan, such
rollovers or plan-to-plan transfers accepted after December 31, 1983,
shall not be included as part of an Employee's accounts. However,
rollovers or plan-to-plan transfers accepted prior to January 1, 1984,
shall be included as part of an Employee's accounts.
(5) With respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), in the case of the transferor plan,
such rollovers or plan-to-plan transfers shall not be treated as
distributions for purposes of this Section 2.2. In the case of the
transferee plan, such rollovers or plan-to-plan transfers shall be
included as part of an Employee's accounts, irrespective of the date
on which the rollover or plan-to-plan transfer is accepted.
(6) In determining whether two employers are to be treated as the
same employer for purposes of Sections 2.2(c)(4) and (5), the Employer
and any Affiliated Employer shall be treated as the same employer.
<PAGE>
(d) The term "Aggregation Group" means either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter defined.
(1) Each qualified plan of the Employer or any Affiliated
Employer, including for this purpose any Simplified Employee Pension
Plan, within the meaning of Code Section 408(k), in which a Key
Employee is a participant in the plan year containing the
Determination Date or any of the four preceding plan years, and each
other qualified plan of the Employer or an Affiliated Employer, which
enables any qualified plan in which a Key Employee participates to
meet the requirements of Code Section 401(a)(4) or 410(b), will be
required to be aggregated. Such a group shall be known as a Required
Aggregation Group. In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy Plan or Super Top
Heavy Plan if the Required Aggregation Group is a Top Heavy Group or
Super Top Heavy Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan or Super Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy Group or Super Top Heavy Group.
(2) The Employer may also include any other plan of the Employer
or an Affiliated Employer, including any Simplified Employee Pension
Plan, within the meaning of Code Section 408(k), not required to be
included in the Required Aggregation Group, provided the resulting
group, taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410(b). Such a group shall be known as a
Permissive Aggregation Group. In the case of a Permissive Aggregation
Group, only a plan that is part of the Required Aggregation Group will
be considered a Top Heavy Plan or Super Top Heavy Plan if the
Permissive Aggregation Group is a Top Heavy Group or Super Top Heavy
Group. No plan in the Permissive Aggregation Group will be considered
a Top Heavy Plan or Super Top Heavy Plan if the Permissive Aggregation
Group is not a Top Heavy Group or Super Top Heavy Group.
(3) Only those plans of the Employer or an Affiliated Employer
whose Determination Dates fall within the same calendar year shall be
aggregated in order to determine whether an Aggregation Group is a Top
Heavy Group or Super Top Heavy Group.
(4) An Aggregation Group shall include any terminated plan of the
Employer or an Affiliated Employer if it was maintained within the
last five plan years ending on the Determination Date.
(e) The term "Present Value of Accrued Benefit," in the case of a
defined benefit plan, shall be determined as follows:
<PAGE>
(1) In the case of an Employee other than a Key Employee, by
using the single accrual method used for all plans of the Employer and
any Affiliated Employer or, if no such single method exists, by using
a method which results in benefits accruing not more rapidly than the
slowest accrual rate permitted under Code Section 411(b)(1)(C);
(2) As of the most recent valuation date occurring within the
twelve month period ending on the Determination Date;
(3) For the first plan year, as if (i) an Employee terminated
employment on the Determination Date or (ii) the Employee terminated
employment on the valuation date, but taking into account the
estimated accrued benefit under the defined benefit plan as of the
Determination Date. For the second plan year, the accrued benefit
under the defined benefit plan taken into account for an Employee must
not be less than the accrued benefit taken into account for the first
plan year unless the difference is attributable to using an estimate
of the accrued benefit as of the Determination Date for the first plan
year and using the actual accrued benefit for the second plan year.
For any other plan year, as if the Employee terminated employment on
the valuation date.
(4) The valuation date must be the same date used for computing
minimum funding costs for the defined benefit plan, regardless of
whether a valuation is performed for the plan year of the defined
benefit plan.
(5) The present value of an Employee's accrued benefit under the
defined benefit plan shall be determined by using the actuarial
assumptions specified in the Adoption Agreement.
(f) The term "Top Heavy Group" means an Aggregation Group in which, as
of the Determination Date, the sum of (1) the Present Value of Accrued
Benefits of Key Employees under all defined benefit plans included in the
Group and (2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the Group exceeds sixty percent of a similar
sum determined for all Employees. A "Super Top Heavy Group" shall be
determined in the same manner as a Top Heavy Group except that ninety
percent shall be substituted for sixty percent.
(g) The Administrator shall determine whether this Plan is a Top Heavy
Plan. Such determination shall be in accordance with Code Section 416 and
the Regulations thereunder.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the Trustee
and the Administrator from time to time as it deems necessary for the
proper administration of the Plan.
<PAGE>
(b) The Employer shall establish a funding policy and method. Thus,
the Employer shall determine whether the Plan has a short run need for
liquidity (for example, to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current need.
The Employer shall communicate such needs and goals to the Trustee, if he
shall have any investment decision making responsibility, in order to
coordinate the investment of the Plan's assets with such needs and goals.
The communication of the funding policy and method shall not, however,
constitute a directive to the Trustee as to the investment of the Trust
Fund. Any such funding policy and method shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or allocated
by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal periodic
review by the Employer or by a qualified person specifically designated by
the Employer, through day-to-day conduct and evaluation, or through other
appropriate ways.
(d) Except as otherwise specifically provided in the Plan, the
Employer shall be responsible for the administration of the Plan and shall
be considered the Named Fiduciary within the meaning of Section 402(a) of
the Act. The Employer shall administer the Plan for the exclusive benefit
of the Participants and their Beneficiaries subject to the specific terms
of the Plan. The Employer shall have the power to determine all questions
arising in connection with the administration, interpretation, and
application of the Plan and any such determination by the Employer shall be
conclusive and binding upon all persons. The Employer may establish
procedures, correct any defect, supply any information, or reconcile any
inconsistency in such manner and to such extent as shall be deemed
necessary or advisable to carry out the purpose of the Plan; provided,
however, that any procedure, discretionary act, interpretation or
construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent
that the Plan be treated as a qualified plan under the terms of Code
Section 401(a) and that it comply with the terms of the Act and all
regulations issued pursuant thereto.
2.4 DESIGNATION OF ADMINISTRATOR
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or may be removed
by the Employer by delivery of written notice of removal, to take effect at a
date specified therein, or upon delivery to the Administrator if no date is
specified. The Employer, upon the resignation or removal of an Administrator,
shall promptly designate a successor Administrator. If the Employer does not
appoint an Administrator, the Employer shall be the Administrator.
<PAGE>
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the Employer may
allocate specific responsibilities to each Administrator as specified in a
writing accepted by each Administrator. In the event that no such allocation of
responsibilities is made by the Employer, the Administrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and shall specify
the responsibilities allocated to each Administrator. The Trustee shall
thereafter accept and act pursuant to the instructions of an Administrator until
such time as the Employer or the remaining Administrators file with the Trustee
a written notice indicating that the authority of such Administrator has been
revoked or otherwise altered.
2.6 RESPONSIBILITIES OF THE ADMINISTRATOR
The primary responsibilities of the Administrator are to assist the
Employer in the administration of the Plan and to carry out those administrative
duties specifically assigned to the Administrator under the Plan.
2.7 RECORDS AND REPORTS
The Employer and Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, and other data that may be
necessary for the proper administration of the Plan. The Administrator shall be
responsible for supplying all information and reports to the Internal Revenue
Service, Department of Labor, Participants, Beneficiaries and others as required
by law.
2.8 APPOINTMENT OF ADVISERS
The Employer, or the Administrator with the consent of the Employer, may
appoint counsel, specialists, advisers, and other persons as the Employer or the
Administrator deems necessary or desirable in connection with the administration
of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to fulfill his responsibilities under the Plan,
the Employer shall supply full and timely information to the Administrator on
all matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer and
shall have no duty or responsibility to verify such information.
<PAGE>
2.10 PAYMENT OF FEES AND EXPENSES
Any Administrator who does not receive full time pay from the Employer
shall be entitled to receive compensation for his services as may be charged by
the Administrator pursuant to his regularly published fee schedule or as may
otherwise be agreed upon in writing between the Employer and Administrator. Fees
and all expenses incident to the administration of the Plan, including, but not
limited to, fees of accountants, legal counsel, and other specialists and their
agents, and other costs of administering the Plan shall be paid from the Trust
Fund. Until paid, all such fees and expenses shall constitute a liability of the
Trust Fund. However, the Employer may pay such fees and expenses directly or
may, in the event such fees and expenses have already been paid, reimburse the
Trust Fund. Any reimbursement of the Trust Fund for fees and administration
expenses that have already been paid from the Trust Fund shall not be considered
an Employer contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of administrative
responsibilities pursuant to Section 2.5, if there shall be more than one
Administrator, they shall act by a majority of their number, but they may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within ninety days after the application is filed. In the event
the claim is denied, the reasons for the denial shall be specifically set forth
in the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12,
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator a written request that further
consideration of his claim be given by the Administrator. Such a request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than
sixty days after receipt of the written notification provided for in Section
2.12. The Administrator shall then conduct an investigation within the next
sixty days. The claimant may be represented by an attorney or any other
representative of his choosing and shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. The claimant or his
representative shall have an opportunity to review all documents in the
possession of the Administrator or Employer that are pertinent to the claim at
issue and its disallowance. A final decision as to the allowance of the claim
shall be made by the Administrator within sixty days of receipt of the appeal
(unless there has been an extension of sixty days due to special circumstances,
<PAGE>
provided the delay and the special circumstances occasioning it are communicated
to the claimant within the sixty day period). Such communication shall be
written in a manner calculated to be understood by the claimant and shall
include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.
2.14 ADMINISTRATOR INDEMNIFICATION
If a person other than the Employer is acting as Administrator, the
Employer agrees to indemnify and save harmless the Administrator against any and
all claims, losses, damages, expenses (including attorney's fees) and
liabilities the Administrator may incur in the exercise and performance of the
Administrator's powers and duties hereunder, unless the same are determined to
be due to gross negligence or willful misconduct.
ARTICLE III
ELIGIBILITY
3.1 COMMENCEMENT OF ACTIVE PARTICIPATION
(a) An Eligible Employee who has satisfied the age and/or service
requirements specified in the Adoption Agreement shall become an Active
Participant effective as of the date specified in the Adoption Agreement.
(b) In the event an Employee is transferred to a position in which he
becomes an Eligible Employee, he shall become an Active Participant on the
date of such transfer or, if he has not satisfied on such date the age
and/or service requirements specified in the Adoption Agreement, as of the
date specified in the Adoption Agreement following his satisfaction of such
requirements.
(c) In the event a former Employee is reemployed by the Employer, he
shall become an Active Participant on the date of his reemployment if he is
an Eligible Employee on that date or, if he has not satisfied on such date
the age and/or service requirements specified in the Adoption Agreement, as
of the date specified in the Adoption Agreement following his satisfaction
of such requirements.
3.2 DETERMINATION OF ACTIVE PARTICIPATION
The Administrator shall determine whether an Employee is an Active
Participant based upon information furnished by the Employer. Such determination
shall be conclusive and binding upon all persons as long as the same is made
pursuant to the Plan and the Act. Such determination shall be subject to review
pursuant to Section 2.13.
3.3 DURATION OF ACTIVE PARTICIPATION
An Employee shall cease to be an Active Participant on the earlier of the
date he incurs a termination of employment or ceases to be an Eligible Employee.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 DETERMINATION OF EMPLOYER'S CONTRIBUTION
(a) The Employer's contribution to a Money Purchase Plan shall be
determined in accordance with the following paragraphs:
(1) For each Plan Year, the Employer shall contribute, on behalf
of each Active Participant described in Section 4.1(a)(2), the
percentage of his Compensation specified in the Adoption Agreement;
provided, however, that in no event shall the amount contributed on
behalf of any Active Participant cause the limitations of Code Section
415 to be exceeded for that Active Participant. All contributions by
the Employer shall be made in cash or in such property as is
acceptable to the Trustee. The Employer shall be required to obtain a
waiver from the Internal Revenue Service for any Plan Year in which it
is unable to make the full required contribution to the Plan.
(2) The Employer shall make a contribution on behalf of any
Active Participant during the Plan Year or other twelve-month period
specified in the Adoption Agreement for determining a Year of Service
for purposes of benefit accrual who is an Employee on the Anniversary
Date or the last day of such other twelve-month period. The Employer
shall also make a contribution on behalf of any Active Participant who
is not an Employee on the Anniversary Date or the last day of such
other twelve-month period if such Active Participant completes a Year
of Service for purposes of benefit accrual.
(3) Notwithstanding the foregoing provisions of this Section
4.1(a), the Employer's contribution for any Fiscal Year shall not
exceed the maximum amount allowable as a deduction to the Employer
under the provisions of Code Section 404. However, if this Plan is a
Top Heavy Plan to which minimum contributions must be made, the
Employer shall contribute the amount necessary to provide such minimum
contributions even if such amount exceeds that which is deductible
under Code Section 404.
(b) The Employer's contribution to a Profit Sharing Plan shall be
determined in accordance with the following paragraphs:
(1) For each Plan Year, the Employer shall contribute to the Plan
such amount as it shall determine, with or without regard to Net
Profit, as specified in the Adoption Agreement. If this Plan is a Top
Heavy Plan to which minimum contributions must be made, the Employer
shall contribute the amount necessary to provide such minimum
contributions even if such amount exceeds current or accumulated Net
Profit or the amount which is deductible under Code Section 404.
<PAGE>
(2) All contributions by the Employer shall be made in cash or in
such property as is acceptable to the Trustee.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the
Plan for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTIONS, FORFEITURES AND EARNINGS
(a) The Employer shall provide the Administrator with all the
information required by the Administrator in order to make a proper
allocation of the Employer's contributions for each Plan Year. Within a
reasonable period of time after the date of receipt by the Administrator of
such information, the Administrator shall allocate such contribution as of
the last day of the twelve-month period specified in the Adoption Agreement
for determining a Year of Service for purposes of benefit accrual as
follows:
(1) The Employer's contribution to a Money Purchase Plan shall be
allocated to each Active Participant's Employer Contribution Account
in the manner set forth in Section 4.1(a).
(2) The Employer's contribution to an integrated Profit Sharing
Plan that is a Top Heavy Plan or that is treated, pursuant to an
election in the Adoption Agreement, as if it were a Top Heavy Plan,
and that is not subject to the annual overall permitted disparity
limit under Section 4.9 shall be allocated as follows:
(i) The Employer's contribution shall be allocated to each
Active Participant's Employer Contribution Account in the same
proportion that his Compensation bears to the Compensation of all
Active Participants; provided, however, that there shall not be
allocated to any Active Participant an amount greater than three
percent of his Compensation.
(ii) That portion of the Employer's contribution not
allocated under Section 4.3(a)(2)(i) shall be allocated to each
Active Participant's Employer Contribution Account in the same
proportion that his Excess Compensation bears to the Excess
Compensation of all Active Participants; provided, however, that
there shall not be allocated to any Active Participant an amount
greater than three percent (or, if lesser, the Maximum Excess
Percentage) of his Excess Compensation; provided, further, that
in the case of an Active Participant who has exceeded the
cumulative permitted disparity limit under Section 4.9, the
allocation of the Employer's contribution to such Active
Participant shall be based on an amount equal to his
Compensation.
<PAGE>
(iii) That portion of the Employer's contribution not
allocated under Sections 4.3(a)(2)(i) and (ii) shall be allocated
to each Active Participant's Employer Contribution Account in the
same proportion that the sum of his Compensation and Excess
Compensation bears to the sum of the Compensation and Excess
Compensation of all Active Participants; provided, however, that
there shall not be allocated to any Active Participant an amount
greater than the product of the sum of his Compensation and
Excess Compensation and the difference between the Maximum Excess
Percentage and three percent (such difference cannot be less than
zero); provided, further, that in the case of an Active
Participant who has exceeded the cumulative permitted disparity
limit under Section 4.9, the allocation of the Employer's
contribution to such Active Participant shall be based on an
amount equal to two times his Compensation.
(iv) That portion of the Employer's contribution not
allocated under Sections 4.3(a)(2)(i), (ii), and (iii) shall be
allocated to each Active Participant's Employer's Contribution
Account in the same proportion that his Compensation bears to the
Compensation of all Active Participants.
(3) The Employer's contribution to an integrated Profit Sharing
Plan that is not a Top-Heavy Plan and that is not subject to the
annual overall permitted disparity limit under Section 4.9 shall be
allocated as follows:
(i) The Employer's contribution shall be allocated to each
Active Participant's Employer Contribution Account in the same
proportion that the sum of his Compensation and Excess
Compensation bears to the sum of the Compensation and Excess
Compensation of all Active Participants; provided, however, that
there shall not be allocated to any Active Participant an amount
greater than the product of the sum of his Compensation and
Excess Compensation and the Maximum Excess Percentage; provided,
further, that in the case of an Active Participant who has
exceeded the cumulative permitted disparity limit under Section
4.9, the allocation of the Employer's contribution to such Active
Participant shall be based on an amount equal to two times his
Compensation.
(ii) That portion of the Employer's contribution not
allocated under Section 4.3(a)(3)(i) shall be allocated to each
Active Participant's Employer's Contribution Account in the same
proportion that his Compensation bears to the Compensation of all
Active Participants.
<PAGE>
(4) The Employer's contribution to a non-integrated Profit
Sharing Plan (or to an integrated plan that is subject to the annual
overall permitted disparity limits under Section 4.9) shall be
allocated to each Active Participant's Employer Contribution Account
in the same proportion that his Compensation bears to the total
Compensation of all Active Participants.
(5) An Active Participant during the Plan Year or other
twelve-month period specified in the Adoption Agreement for
determining a Year of Service for purposes of benefit accrual who is
an Employee on the Anniversary Date or the last day of such other
twelve-month period shall share in the Employer's contributions. An
Active Participant who is not an Employee on the Anniversary Date or
the last day of such other twelve-month period shall share in the
Employer's contribution if such Active Participant completes a Year of
Service for purposes of benefit accrual.
(6) In no event shall an amount allocated on behalf of an Active
Participant under Section 4.3(a)(2), (3), or (4) cause the limitations
of Code Section 415 to be exceeded for that Participant. Any amount
that would be allocated to an Active Participant but for the preceding
sentence shall be reallocated instead to the remaining Active
Participants pursuant to the applicable allocation formula under
Section 4.3(a)(2), (3), or (4).
(7) If an Employer maintains two or more Paired Plans only one of
such Paired Plans may provide for the disparity permitted under Code
Section 401(l).
(b) As of each Valuation Date, before the allocation of Employer
contributions and Forfeitures allocable as of such date, any earnings or
losses (including net appreciation or net depreciation) of the Trust Fund
shall be allocated in the same proportion that each Participant's Accounts
bear to the total of all Participants' Accounts as of such date.
(c) As of the date specified in Section 4.3(a), any Forfeitures
occurring since the last such date shall first be used to restore the
previously forfeited Accrued Benefit of any Participant in accordance with
Section 6.4(g) and shall then be used to satisfy any contribution that may
be required pursuant to Section 4.3(e) or 6.9 or both. The remaining
Forfeitures, if any, shall, in the case of a Profit Sharing Plan, be
allocated as if they were additional Employer contributions, in the case of
a Money Purchase Plan, be treated in accordance with the Adoption Agreement
and, in the case of a 401(k) Profit Sharing Plan, be handled in accordance
with Section 11.4(b).
(d) Minimum Contributions Required for Top Heavy Plan Years.
(1) For any Top Heavy Plan Year, to the extent that Employer
contributions and Forfeitures allocated pursuant to Section
<PAGE>
4.3(a) and Article XI are insufficient to provide a minimum
contribution to each Active Participant who is a Non-Key Employee, the
Employer shall contribute the additional amount necessary to provide
such minimum contribution. An Active Participant who is a Non-Key
Employee is treated as having received a minimum contribution if the
sum of the Employer's contributions and Forfeitures allocated to his
Employer Contribution Account or, in the case of a 401(k) Profit
Sharing Plan, his Non-Elective Accounts, equals three percent of his
415 Compensation. However, if such sum is less than three percent of
his 415 Compensation and this Plan does not enable a defined benefit
plan, which is included in the same Required Aggregation Group (as
defined in Section 2.2), to meet the requirements of Code Section
401(a)(4) or 410(b), then the minimum contribution shall be equal to a
Non-Key Employee's 415 Compensation multiplied by a percentage which
is equal to the largest percentage determined for any Key Employee by
dividing the employer contributions and forfeitures allocated on
behalf of such Key Employee under this Plan and all other plans
included in the same Required Aggregation Group by such Key Employee's
415 Compensation. In determining whether a minimum contribution has
been provided to an Active Participant who is a Non-Key Employee,
there shall be taken into account any employer contributions (not
including, however, employer contributions which are subject to Code
Sections 401(k) and 401(m)) and forfeitures allocated to such Non-Key
Employee under any other defined contribution plan which is included
with this Plan in a Required Aggregation Group.
(2) If a Non-Key Employee, who is an Active Participant, also
participates in one or more other defined contribution plans
maintained by the Employer or any Affiliated Employer, which are
included in the same Required Aggregation Group, it is not necessary
to provide minimum contributions to such Non-Key Employee under this
Plan and all such other defined contribution plans. In that event, the
minimum contribution will be provided as specified in the Adoption
Agreement. However, if a Non-Key Employee is an Active Participant in
two or more Paired Plans, then the minimum contribution shall be
provided under the Money Purchase Plan, if any, and then under the
Profit Sharing Plan.
(3) If a Non-Key Employee, who is an Active Participant, also
participates in one or more defined benefit plans maintained by the
Employer or any Affiliated Employer, which are included in the same
Required Aggregation Group, it is not necessary to provide a minimum
contribution under this Plan and a minimum benefit under any such
other defined benefit plan. In that event, the Employer shall specify
in the Adoption Agreement whether a minimum contribution will be
provided under this Plan or whether a minimum benefit will be provided
under such other defined benefit plan. If a minimum contribution is
provided under
<PAGE>
this Plan in lieu of providing a minimum benefit under such other
defined benefit plan, then the minimum contribution for each Non-Key
Employee who is an Active Participant and who also participates in one
or more defined benefit plans maintained by the Employer or Affiliated
Employer shall be equal to five percent of his 415 Compensation.
(4) The minimum contribution provided for in this Section 4.3(d)
shall be provided on behalf of all Non-Key Employees who are Active
Participants and are employed, in the case of a Profit Sharing or
Money Purchase Plan, on the last day of the twelve-month period
specified in the Adoption Agreement for determining a Year of Service
for purposes of benefit accrual and, in the case of a 401(k) Profit
Sharing Plan, on the Anniversary Date, including Non-Key Employees who
have (i) failed to complete a Year of Service, (ii) declined to make
mandatory contributions (if required) to the Plan, (iii) failed to
make Elective Contributions in the case of a 401(k) Profit Sharing
Plan; or (iv) been excluded from participation because of their level
of Compensation. Minimum contributions shall be allocated to a Non-Key
Employee's Employer Contribution Account, in the case of a Profit
Sharing or Money Purchase Plan, or as specified in Section 11.4(c), in
the case of a 401(k) Profit Sharing Plan.
(5) The Employer shall specify in the Adoption Agreement whether
a minimum contribution shall be provided to all Active Participants
otherwise entitled to an allocation under this Section 4.3(d) without
regard to whether an Active Participant is a Non-Key Employee.
(e) If any Active Participant who is entitled to allocation of the
Employer's contributions and Forfeitures, if any, is erroneously omitted
and discovery of such omission is not made until after the allocation of
contributions and Forfeitures has been made, the Employer, in lieu of
directing a reallocation, may make a subsequent contribution so that the
omitted Active Participant receives an allocation which he would have
received had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part for any
Fiscal Year under applicable provisions of the Code.
(f) If any individual who should not have been entitled to an
allocation of the Employer's contributions and Forfeitures receives an
allocation and discovery of such incorrect allocation is not made until
after the allocation of contributions and Forfeitures has been made, the
Employer, subject to the provisions of Section 9.7, shall not be entitled
to recover the contribution allocated to the ineligible individual
regardless of whether or not a deduction is allowable with respect to such
contribution. In such event, the Employer may direct a reallocation or, in
lieu thereof, the amount allocated to the ineligible individual shall
constitute a Forfeiture for the period in which the discovery is made.
<PAGE>
(g) If a Participant is reemployed after incurring five consecutive
1-Year Breaks in Service, then separate Accounts shall be maintained with
respect to his Vested Accrued Benefit attributable to Employer
contributions made prior to his termination of employment and with respect
to his Accrued Benefit attributable to Employer contributions made after
his reemployment. Maintenance of separate Accounts is no longer necessary
once a Participant is fully Vested in his Accrued Benefit attributable to
Employer contributions made after his reemployment.
(h) A Participant shall be treated as benefiting under the Plan for
any Plan Year during which the Participant received or is deemed to receive
an allocation in accordance with Regulation 1.410(b)-3(a).
(i) There shall be no reduction in or cessation of the allocation of
Employer contributions and Forfeitures on account of an Active
Participant's attainment of any specified age.
4.4 MAXIMUM ANNUAL ADDITIONS
(a)(1) If the Participant does not participate in, and has never
participated in, another qualified plan maintained by the Employer, or a
welfare benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, or an individual medical account (as defined in Code Section
415(l)(2)) maintained by the Employer, or a simplified employee pension (as
defined in Code Section 408(k)) maintained by the Employer, the amount of
Annual Additions which may be allocated to the Participant's Accounts
during any Limitation Year shall not exceed the Maximum Permissible Amount.
If the Employer contribution that would otherwise be allocated to a
Participant's Accounts would cause the Annual Additions during the
Limitation Year to exceed the Maximum Permissible Amount, the amount
allocated will be reduced so that the Annual Additions allocated during the
Limitation Year will equal the Maximum Permissible Amount.
(2) Prior to determining the Participant's actual 415
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a
reasonable estimation of the Participant's 415 Compensation for the
Limitation Year, uniformly determined for all Participants similarly
situated.
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual 415
Compensation for such Limitation Year.
(4) If, pursuant to Section 4.4(a)(2), or, as a result of the
allocation of Forfeitures or, as a result of a reasonable error in
determining the amount of Elective Contributions in the case of a
401(k) Profit Sharing Plan, there is an Excess Amount, the Excess
Amount will be disposed of as follows:
<PAGE>
(i) Any nondeductible voluntary Employee contributions, to
the extent they would reduce the Excess Amount, will be returned
to the Participant;
(ii) If, after the application of Section 4.4(a)(4)(i), an
Excess Amount still exists, then any Elective Contributions, to
the extent they would reduce the Excess Amount, will be returned
to the Participant;
(iii) If, after the application of Sections 4.4(a)(4)(i) and
(ii), an Excess Amount still exists, then the Excess Amount must
be held unallocated in a suspense account until the following
Limitation Year. In such following Limitation Year, the Excess
Amount, in the case of a Profit Sharing Plan, will be allocated
among the Active Participants entitled to an allocation under
Section 4.3 as if such Excess Amount were an Employer
contribution, in the case of a Money Purchase Plan, will be used
to reduce Employer contributions for such Limitation Year or, in
the case of a 401(k) Profit Sharing Plan, will be handled in the
following order:
(A) If the Plan provides for Discretionary Non-Elective
Contributions, such Excess Amount will be allocated among
the Active Participants entitled to an allocation under
Section 11.4(a)(3) as if such Excess Amount were a
Discretionary Non-Elective Contribution.
(B) If Section 4.4(a)(4)(iii)(A) is not applicable and
the Plan provides for Fixed Non-Elective Contributions, such
Excess Amount will be used to reduce such contributions.
(C) If Sections 4.4(a)(4)(iii)(A) and (B) are not
applicable and the Plan provides for Matching Contributions,
such Excess Amount will be used to reduce such
contributions.
Any Matching Contributions or Qualified Matching Contributions that are
allocated to a Participant's Matching Account or Qualified Matching Account and
that are made on account of Elective Contributions returned to a Participant
pursuant to Section 4.4(a)(4)(ii) shall be forfeited. The forfeiture of Matching
Contributions or Qualified Matching Contributions shall be deemed to occur in
the Limitation Year following the Limitation Year to which the Excess Amount
relates and shall be treated in accordance with the election made in the
Adoption Agreement.
(iv) If a suspense account is in existence at any time
during a Limitation Year pursuant to this Section 4.4(a), it will
not participate in the allocation of investment gains and losses.
If a suspense account is in existence at any time during a
particular Limitation Year, all
<PAGE>
amounts in the suspense account must be handled in the manner
described in Section 4.4(a)(4)(iii) before any Employer
contributions or any Employee contributions may be made to the
Plan during that Limitation Year. Excess Amounts may not be
distributed to Participants.
(b)(1) This Section 4.4(b) applies if, in addition to this Plan, the
Participant is covered under another qualified Master or Prototype defined
contribution plan (including Paired Plans) maintained by the Employer, or a
welfare benefit fund maintained by the Employer, or an individual medical
account maintained by the Employer, or a simplified employee pension maintained
by the Employer during any Limitation Year. The Annual Additions which may be
allocated to a Participant's Accounts under this Plan during any such Limitation
Year shall not exceed the Maximum Permissible Amount reduced by the Annual
Additions allocated to a Participant under such other qualified Master or
Prototype defined contribution plans, welfare benefit funds, individual medical
accounts, and simplified employee pensions during the same Limitation Year. If
the Annual Additions with respect to the Participant under such other qualified
Master or Prototype defined contribution plans, welfare benefit funds,
individual medical accounts, and simplified employee pensions are less than the
Maximum Permissible Amount, and the Annual Additions that would otherwise be
allocated to the Participant's Accounts under this Plan would cause the Annual
Additions allocated during the Limitation Year to exceed the Maximum Permissible
Amount, then the Annual Additions allocated under this Plan will be reduced so
that the Annual Additions under all such plans and funds for the Limitation Year
will equal the Maximum Permissible Amount. If the Annual Additions with respect
to the Participant under such other qualified Master or Prototype defined
contribution plans, welfare benefit funds, individual medical accounts, and
simplified employee pensions in the aggregate are equal to or greater than the
Maximum Permissible Amount, then no Annual Additions will be allocated to the
Participant's Accounts under this Plan during the Limitation Year.
(2) Prior to determining the Participant's actual 415
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described
in Section 4.4(a)(2).
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual 415
Compensation for the Limitation Year.
(4) If, pursuant to Section 4.4(b)(2), or, as a result of the
allocation of Forfeitures or, as a result of a reasonable error in
determining the amount of Elective Contributions in the case of a
401(k) Profit Sharing Plan, a Participant's Annual Additions under
this Plan and such other plans and
<PAGE>
funds would result in an Excess Amount for a Limitation Year, the
Excess Amount will be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a simplified
employee pension will be deemed to have been allocated first, followed
by Annual Additions to a welfare benefit fund or individual medical
account, regardless of the actual allocation date, and Annual
Additions attributable to Elective Contributions and voluntary
Employee contributions will be deemed to have been allocated last
regardless of the actual allocation date.
(5) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date
of another plan, the Employer shall specify in the Adoption Agreement
the Excess Amount attributed to this Plan.
(6) Any Excess Amount attributed to this Plan will be disposed in
the manner described in Section 4.4(a)(4).
(c) If a Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a Master or
Prototype defined contribution plan, Annual Additions which may be
allocated to the Participant's Accounts under this Plan during any
Limitation Year will be limited in accordance with Section 4.4(b), unless
the Employer provides other limitations in the Adoption Agreement.
(d) If the Employer maintains, or at any time maintained, a defined
benefit plan covering any Participant in this Plan, the sum of the
Participant's Defined Benefit Fraction and Defined Contribution Fraction
will not exceed 1.0 during any Limitation Year. During any Limitation Year
that the sum of the Defined Benefit Fraction and the Defined Contribution
Fraction on behalf of a Participant does exceed 1.0, then the Employer
shall reduce the Participant's Projected Annual Benefit under the defined
benefit plan or its contribution on behalf of such Participant to this Plan
to the extent necessary to prevent the sum of the Defined Contribution
Fraction and the Defined Benefit Fraction from exceeding 1.0. The Employer
shall specify in its Adoption Agreement which reduction shall apply.
(e) If the Employer maintains, or at any time maintained, a defined
benefit plan, then for any Top Heavy Plan Year the denominators of the
Defined Benefit Fraction and Defined Contribution Fraction will be
determined by substituting 100% for 125% unless enhanced minimum benefits
or contributions are provided in such defined benefit plan or in this Plan,
as specified in the Adoption Agreement. The enhanced minimum contribution
for this Plan is one percent of a Non-Key Employee's 415 Compensation or
two and one-half percent of a Non-Key Employee's 415 Compensation in the
event the Employer has specified in the Adoption Agreement to provide the
Non-Key Employees described in Section 4.3(d)(3) with a minimum
contribution of five percent of 415 Compensation.
<PAGE>
(f) For purposes of this Section, the following terms shall be defined
as follows:
(1) Annual Additions means the sum credited to a Participant's
Accounts during any Limitation Year of (i) Employer contributions,
(ii) effective with respect to Limitation Years beginning after
December 31, 1986, Employee contributions, (iii) Forfeitures, (iv)
amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer, (v) amounts
derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of
a Key Employee (as defined in Code Section 419A(d)(3)) under a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer and (vi) amounts allocated under a simplified employee
pension. Notwithstanding the foregoing, for Limitation Years beginning
prior to January 1, 1987, only that portion of Employee contributions
equal to the lesser of Employee contributions in excess of six percent
of 415 Compensation or one-half of Employee contributions shall be
considered Annual Additions. Any Excess Amount under Section 4.4(a)(4)
which, during any Limitation Year, is allocated or used to reduce
Employer contributions shall be considered an Annual Addition during
such Limitation Year.
(2) The term "415 Compensation" means a Participant's Earned
Income, wages, salaries, fees for professional services and other
amounts received (without regard to whether or not an amount is paid
in cash) for personal services actually rendered in the course of
employment with the Employer maintaining the Plan to the extent that
the amounts are includible in gross income (including, but not limited
to, commissions paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, reimbursements and expense allowances under
a nonaccountable plan (as described in Regulation Section 1.62 -
2(c))) but excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are excludable from the Employee's
gross income, or any distributions from a plan of deferred
compensation;
(ii) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by an
Employee becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
<PAGE>
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax benefits, or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the
contributions are excludable from the gross income of the
Employee). For purposes of applying the limitations of this
Section 4.4, 415 Compensation for any Limitation Year is the 415
Compensation actually paid during such Limitation Year.
(3) The term "Defined Benefit Fraction" means a fraction, the
numerator of which is the sum of the Participant's Projected Annual
Benefits under all defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser
of 125% of the dollar limitation determined for the Limitation Year
under Code Sections 415(b)(1)(A) and (d) or 140% of his average 415
Compensation for his high three years under Code Section 415(b)(1)(B)
and the Regulations thereunder. Notwithstanding the preceding
sentence, if the Participant participated as of the first day of the
first Limitation Year beginning after December 31, 1986, in one or
more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be
less than 125% of the sum of the Participant's accrued benefits under
such plans determined as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding, however, any changes
in the terms and conditions of such plans after May 5, 1986. The
preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code
Section 415 for all Limitation Years beginning before January 1, 1987.
(4) The term "Defined Contribution Dollar Limitation" means the
dollar limitation set forth in Code Section 415(b)(1)(A) as in effect
for a Limitation Year. If a short Limitation Year is created because
of an amendment changing the Limitation Year to a different twelve
consecutive month period, the Defined Contribution Dollar Limitation
will be reduced by multiplying such limitation by the following
fraction:
number of months in the short Limitation Year
---------------------------------------------
twelve
(5) The term "Defined Contribution Fraction" means a fraction,
the numerator of which is the sum of the Annual Additions allocated to
the Participant's accounts under all defined contribution plans
(whether or not terminated) maintained
<PAGE>
by the Employer during the current and all prior Limitation Years, and
the denominator of which is the sum of the maximum aggregate amounts
determined separately for the current and all prior Limitation Years
(regardless of whether a defined contribution plan was maintained by
the Employer). The Administrator may make reasonable assumptions in
projecting the Defined Contribution Fraction to Normal Retirement Age.
The maximum aggregate amount for any Limitation Year is the lesser of
125% of the Defined Contribution Dollar Limitation or thirty five
percent of the Participant's 415 Compensation during such Limitation
Year. For Limitation Years beginning prior to January 1, 1987, Annual
Additions shall not be recomputed to treat all Employee contributions
as Annual Additions.
If the Employee participated as of the first day of the first Limitation
Year beginning after December 31, 1986, in one or more defined contribution
plans (including this Plan) and defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, and such plans satisfied the
requirements of Code Section 415 for the last Limitation Year beginning before
January 1, 1987, then the numerator of the Defined Contribution Fraction will be
adjusted if the sum of the Defined Contribution Fraction and the Defined Benefit
Fraction would otherwise exceed one. Under the adjustment, an amount equal to
the product of (i) the excess of the sum of the fractions over one and (ii) the
denominator of the Defined Contribution Fraction will be permanently subtracted
from the numerator of the Defined Contribution Fraction. The adjustment is
calculated by determining the fractions as of the last day of the Limitation
Year beginning before January 1, 1987, but, for this purpose, disregarding any
changes in the terms and conditions of all such plans made after May 6, 1986,
and applying Code Section 415 as in effect on the first day of the Limitation
Year beginning on or after January 1, 1987.
(6) The term "Employer" means the Employer and all Affiliated
Employers.
(7) The term "Excess Amount" means the excess of the
Participant's Annual Additions during a Limitation Year over the
Maximum Permissible Amount.
(8) The term "Limitation Year" means the twelve consecutive month
period used to determine whether an Active Participant has completed a
Year of Service for purposes of determining his entitlement to an
allocation under Section 4.3. If the Limitation Year is amended to a
different twelve consecutive month period, the new Limitation Year
must begin on a date within the Limitation Year in which the amendment
is made.
(9) The term "Master or Prototype Plan" means a plan the form of
which is the subject of a favorable opinion letter from the Internal
Revenue Service.
<PAGE>
(10) The term "Maximum Permissible Amount" means the maximum
Annual Additions that may be allocated to a Participant's accounts
under this Plan and any other defined contribution plans maintained by
the Employer for any Limitation Year, which shall not exceed the
lesser of:
(i) The Defined Contribution Dollar Limitation, or
(ii) Twenty-five percent of the Participant's 415
Compensation for the Limitation Year.
The limitation referred to in Section 4.4(f)(10)(ii) shall not apply to any
contribution for medical benefits (within the meaning of Code Section 401(h) or
419A(f)(2)) which is otherwise treated as an Annual Addition under Code Sections
415(l)(1) or 419A(d)(2).
(11) The term "Projected Annual Benefit" means the annual
retirement benefit (adjusted to an actuarially equivalent straight
life annuity if such benefit is expressed in a form other than a
straight life annuity or a qualified joint and survivor annuity under
Code Section 417) to which a Participant participating in a defined
benefit plan would be entitled under the terms of such plan assuming:
(i) The Participant will continue employment until the
normal retirement age under such plan (or current age, if later),
and
(ii) The Participant's 415 Compensation during the current
Limitation Year and all other relevant factors used to determine
benefits under such plan will remain constant for all future
Limitation Years.
(g) Notwithstanding anything contained in this Section 4.4 to the
contrary, the limitations, adjustments and other requirements prescribed in
this Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.5 TRANSFERS FROM QUALIFIED PLANS
(a) If specified in the Adoption Agreement and with the consent of the
Employer, amounts may be transferred from other qualified plans, with
respect to an Eligible Employee, provided that the trust from which such
funds are transferred permits the transfer to be made and the transfer will
not jeopardize the qualification of the Plan or create adverse tax
consequences for the Employer. The amounts transferred shall be credited to
a separate account herein referred to as a "Rollover Account". A
Participant's Rollover Account shall be fully Vested at all times and shall
not be subject to forfeiture for any reason other than Section 6.9.
<PAGE>
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in Sections 4.5(d).
(c) Amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(4)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d) and Section 11.3(e). Also, amounts
attributable to employer contributions under a pension plan, which are
transferred from another qualified plan in a plan-to-plan transfer, shall
not be distributed prior to a Participant's termination of employment. The
provisions of this Section 4.5(c) shall not apply, however, if the
plan-to-plan transfer complies with the requirements of Regulation
1.411(d)-4 Q&A-3(b).
(d) If specified in the Adoption Agreement, a Participant may elect,
subject to the provisions of Section 4.5(c), to withdraw all or any portion
of the balance credited to his Rollover Account in a manner which is
consistent with and satisfies the provisions of Section 6.5. A withdrawal
under this Section 4.5 shall not cause the Forfeiture of any Account to
which Employer contributions have been allocated.
(e) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (1) amounts transferred
to this Plan directly from another qualified plan; (2) distributions
received by an Employee from another qualified plan which are eligible for
tax free rollover to a qualified plan and which are transferred by the
Employee to this Plan within sixty days following his receipt thereof; (3)
amounts distributed to the Employee from a conduit individual retirement
account and transferred by the Employee to this Plan within sixty days of
his receipt thereof provided that the conduit individual retirement account
has no assets other than assets (and the earnings on said assets) which (i)
were previously distributed to the Employee by another qualified plan (ii)
were eligible for tax-free rollover to a qualified plan and (iii) were
deposited in such conduit individual retirement account within sixty days
of receipt thereof.
(f) Prior to accepting any transfers to which this Section 4.5
applies, the Employer may require the Employee to establish that the
amounts to be transferred to this Plan meet the requirements of this
Section 4.5 and may also require the Employee to provide an opinion of
counsel satisfactory to the Employer that the amounts to be transferred
meet the requirements of this Section 4.5.
(g) Notwithstanding the foregoing provisions of this Section 4.5 to
the contrary, a transfer directly to this Plan from another qualified plan
(or a transaction having the effect of such a
<PAGE>
transfer) shall only be permitted if it will not result in the elimination
or reduction of any "Section 411(d)(6) protected benefit" as described in
Section 8.1(e).
4.6 VOLUNTARY CONTRIBUTIONS
(a) If this is an amendment to a Plan that had previously allowed
voluntary Employee contributions, then, except as provided in 4.6(b) below,
this Plan will not accept voluntary Employee contributions for Plan Years
beginning after the Plan Year in which this Plan is adopted by the
Employer.
(b) For 401(k) Profit Sharing Plans, if elected in the Adoption
Agreement, each Active Participant may elect to make contributions to the
Plan. Such contributions, if paid to or withheld by the Employer, shall be
paid to the Trustee within a reasonable period of time but in no event
later than ninety days after the receipt or withholding of the
contribution. Amounts contributed under this Section 4.6 shall be credited
to a separate account herein referred to as a "Voluntary Contribution
Account." A Participant's Voluntary Contribution Account shall be fully
vested at all times and shall not be subject to Forfeiture for any reason
other than Section 6.9.
(c) A Participant may elect to withdraw all or any portion of the
balance of his Voluntary Contribution Account in a manner which is
consistent with and satisfies the provisions of Section 6.5. If the
Administrator further subdivides a Participant's Voluntary Contribution
Account with respect to voluntary contributions (and earnings thereon)
which were made on or before a specified date, a Participant shall be
permitted to designate which sub-account shall be the source of his
withdrawal. In the event such a withdrawal is made, or in the event a
Participant has received a hardship distribution pursuant to Regulation
1.401(k)-1(d)(2)(iii)(B) from this Plan or any other plan maintained by the
Employer or an Affiliated Employer, then such Participant shall be barred
from making any voluntary contributions for a period of twelve months after
receipt of the withdrawal or distribution. A withdrawal under this Section
4.6 shall not cause the Forfeiture of any Account to which Employer
contributions have been allocated.
4.7 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS
(a) If this is an amendment to a Plan that previously permitted
deductible voluntary contributions, then each Participant who made a
"Qualified Voluntary Employee Contribution" within the meaning of Code
Section 219(e)(2) as it existed prior to the enactment of the Tax Reform
Act of 1986, shall have his contribution held in a separate Qualified
Voluntary Employee Contribution Account which shall be fully Vested at all
times and shall not be subject to Forfeiture for any reason other than
Section 6.9. Such contributions, however, shall not be permitted if they
are attributable to taxable years beginning after December 31, 1986.
<PAGE>
(b) A Participant may elect to withdraw all or any portion of the
balance of his Qualified Voluntary Employee Contribution Account. Any
withdrawal shall be made in a manner which is consistent with and satisfies
the provisions of Section 6.5. A withdrawal under this Section 4.7 shall
not cause the Forfeiture of any Account to which Employer contributions
have been allocated.
4.8 MANDATORY EMPLOYEE CONTRIBUTIONS
(a) If this is an amended Plan that permitted mandatory Employee
contributions prior to such amendment, then each Participant who made
mandatory Employee contributions shall have his contribution held in a
separate Mandatory Employee Contribution Account which shall be fully
Vested at all times and shall not be subject to Forfeiture for any reason
other than Section 6.9. Such contributions shall not be permitted under
this Plan.
(b) A Participant may elect to withdraw all or any portion of the
balance of his Mandatory Employee Contribution Account. Any such withdrawal
shall be made in a manner which is consistent with and satisfies the
provisions of Section 6.5. A withdrawal under this Section 4.8 shall not
cause the Forfeiture of any Account to which Employer contributions have
been allocated.
4.9 OVERALL PERMITTED DISPARITY LIMITS
(a) Annual overall permitted disparity limit. For any Plan Year this
Plan benefits any Active Participant who benefits under another qualified
plan or simplified employee pension, as defined in Code Section 408(k),
maintained by the Employer or an Affiliated Employer that provides for
permitted disparity (or imputes disparity), Employer contributions in the
case of a Profit Sharing Plan, Discretionary Non-Elective Contributions in
the case of a 401(k) Profit Sharing Plan, and Forfeitures, if applicable,
will be allocated in accordance with Section 4.3(a)(4). In the case of a
Money Purchase Plan subject to this Section 4.9(a), the Employer
contribution determined under Section 4.1(a) shall be allocated to each
Active Participant's Employer Contribution Account in the same proportion
that his Compensation bears to the Compensation of all Active Participants.
(b) Cumulative permitted disparity limit. Effective for Plan Years
beginning on or after January 1, 1995, the cumulative permitted disparity
limit for a Participant is thirty-five total cumulative permitted disparity
years. The term "total cumulative permitted disparity years" means the
number of years credited to the Participant for allocation or accrual
purposes under this Plan, any other qualified plan or simplified employee
pension plan (whether or not terminated) ever maintained by the Employer or
an Affiliated Employer. For purposes of determining the Participant's
cumulative permitted disparity limit, all Plan Years ending in the same
calendar year are treated as the same year. If the Participant has not
benefited under a defined benefit or target benefit plan for any Plan Year
beginning on or
<PAGE>
after January 1, 1994, the Participant has no cumulative permitted
disparity limit.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
As of each Valuation Date the Trustee shall determine the net worth of the
assets comprising the Trust Fund as it exists on the Valuation Date. In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the Valuation Date and shall deduct
all fees and expenses for which the Trustee and Administrator have not yet
obtained reimbursement from the Employer or the Trust Fund.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Upon Normal Retirement or Early Retirement, a Participant's Accrued Benefit
shall be paid to the Participant at the time and in the manner provided for
under Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant prior to Normal or Early
Retirement or other termination of employment, a Participant's Accrued
Benefit shall become fully Vested and shall be paid to such Participant's
Beneficiary at the time and in the manner provided for under Section 6.6.
(b) Upon the death of a Participant subsequent to Normal or Early
Retirement or other termination of employment, the distribution of the
Participant's remaining Accrued Benefit shall be paid to such Participant's
Beneficiary at the time and in the manner provided for under Section 6.6.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the Accrued
Benefit of a deceased Participant as the Administrator may deem desirable.
The Administrator's determination of death and of the right of any person
to receive payment shall be conclusive.
(d) Unless otherwise provided in Section 6.6, the Participant's spouse
will receive a Pre-Retirement Survivor Annuity. That portion of a
Participant's Accrued Benefit not payable in the form of a Pre-Retirement
Survivor Annuity (or his entire Accrued Benefit if the Pre-Retirement
Survivor Annuity has been waived in the manner prescribed in Section 6.6)
shall be paid to his Beneficiary designated on a form satisfactory to the
Administrator. A Participant may at any time change his Beneficiary by
filing written notice of such change with the Administrator. However, any
such change of Beneficiary is subject to the spousal consent provisions of
Sections 6.5(a)(2) and 6.6(b). In the event no valid designation of
Beneficiary exists at the time of the Participant's death, his Accrued
Benefit shall be paid to the following persons in the order named:
(1) Spouse,
(2) Children,
(3) Parents,
(4) A trust created either in the Participant's will or in a
lifetime instrument of which the Participant was a grantor, or
(5) The personal representative or administrator of the
Participant's estate.
Multiple Beneficiaries in the same class shall share equally in any
distribution hereunder, unless the Beneficiary designation specifically provides
otherwise.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
Normal or Early Retirement or other termination of employment, a Participant's
Accrued Benefit shall become fully Vested and shall be paid to such Participant
at the time and in the manner provided for under Section 6.5.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) In the event of a Participant's termination of employment for a
reason other than Normal or Early Retirement, Total and Permanent
Disability or death, the Vested portion of a Participant's Accrued Benefit
shall be paid to such Participant at the time and in the manner provided
for under Section 6.5.
(b) The Vested portion of a Participant's Accrued Benefit shall be an
amount equal to the sum of those Accounts of the Participant in which he is
fully Vested plus a percentage of such Participant's Employer Contribution
Account, in the case of a Profit Sharing or Money Purchase Plan, or
Discretionary Non-Elective Account, Fixed Non-Elective Account or Matching
Account, in the case of a 401(k) Profit Sharing Plan, based on the
Participant's number of Years of Service and the vesting schedule specified
in the Adoption Agreement.
(c) For any Top Heavy Plan Year, one of the minimum top heavy vesting
schedules, as elected by the Employer in the Adoption Agreement, will
automatically apply to the Plan. The minimum top heavy vesting schedule
applies to his entire Accrued Benefit, excluding the portion thereof
attributable to Employee contributions, but including that portion accrued
before the effective date of Code Section 416 and accrued before the Plan
became a Top Heavy Plan. However, this Section does not apply to the
Accrued Benefit of any Participant who does not have an Hour of Service
after the Plan becomes a Top Heavy Plan and the Vested percentage of such
Participant shall be determined without regard to this Section 6.4(c). If,
in any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan, the
Administrator shall continue to use the vesting schedule in effect while
the Plan was a Top Heavy Plan.
(d) Notwithstanding the foregoing provisions of Sections 6.4(b) and
(c) to the contrary, upon the complete discontinuance of the Employer's
contributions to the Plan, in the case of a Profit Sharing Plan or 401(k)
Profit Sharing Plan, or upon any full or partial termination of the Plan,
the Accrued Benefit of any affected Participant shall become fully Vested
and shall not thereafter be subject to Forfeiture.
(e) If this is an amended or restated Plan, then, notwithstanding the
vesting schedule specified in the Adoption Agreement, the Vested percentage
of a Participant shall not be less than the Vested percentage determined as
of the later of the effective date or adoption date of the amendment or
restatement. The computation of a Participant's Vested percentage shall not
be reduced as the result of any direct or indirect amendment to this Plan.
<PAGE>
(f) If the Plan's vesting schedule is amended or if the Plan is
amended in any way that directly or indirectly affects the computation of
the Participant's Vested percentage or if the Plan is deemed amended
because it is a Top Heavy Plan, then each Participant with at least three
Years of Service as of the expiration date of the election period may elect
to have his Vested percentage computed under the Plan without regard to
such amendment. Notwithstanding the foregoing, for Plan Years beginning
before January 1, 1989, or with respect to Employees who fail to complete
at least one Hour of Service in a Plan Year beginning after December 31,
1988, five shall be substituted for three in the preceding sentence. If a
Participant fails to make such an election, then such Participant shall be
subject to the new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment and shall end sixty
days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
Notwithstanding the foregoing, no election need be provided to a
Participant whose Vested percentage under the Plan as amended cannot be less at
any time than his Vested percentage determined without regard to such amendment.
(g) If any Participant who had a termination of employment is
reemployed by the Employer before incurring five consecutive 1-Year Breaks
in Service and such Participant had received a distribution of his entire
Vested Accrued Benefit prior to his reemployment, then the non-Vested
portion of his Accrued Benefit, which was previously forfeited, shall be
restored to him only if he repays the full amount previously distributed to
him before the earlier of five years after the date on which the
Participant is subsequently reemployed by the Employer or the close of the
first period of five consecutive 1-Year Breaks in Service commencing after
the distribution. In the event such Participant does repay the full amount
previously distributed to him, the non-Vested portion of his Accrued
Benefit which was previously forfeited must be restored in full, unadjusted
by any gains or losses occurring subsequent to the Valuation Date preceding
the date of distribution. The optional forms of benefit (within the meaning
of Code 411(d)(6)) available at the time the Participant's Vested Accrued
Benefit was distributed to him shall continue to be available to his
Accrued Benefit as restored under this Section 6.4(g). Any amount to be
restored pursuant to this Section 6.4(g) shall first be taken from
Forfeitures, if any, and then from earnings, if any, of the Trust Fund. If
there are no Forfeitures or earnings or they are not sufficient to provide
the amount required to be restored, then the Employer shall make a
contribution sufficient to restore to the Participant the amount required
under this Section 6.4(g). The provisions of this Section 6.4(g) shall not
<PAGE>
apply to any Participant who was fully Vested in his Accrued Benefit at the
time he received a distribution of his Accrued Benefit from the Plan.
(h) In determining Years of Service for purposes of determining a
Participant's Vested percentage, Years of Service shall be excluded as
specified in the Adoption Agreement.
(i) If a distribution is made at a time when a Participant is not
fully Vested in one of his Accounts and the Participant may increase the
Vested percentage of such Account, then at any relevant time the
Participant's Vested portion of such Account shall be equal to an amount
("X") determined by the formula:
X = P x (AB + D) - D
For purposes of applying the formula: P is the Vested percentage at
the relevant time, AB is the balance of his Account at the relevant time,
and D is the amount of the distribution.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who
is married on the Annuity Starting Date and who does not die before the
Annuity Starting Date shall receive his Vested Accrued Benefit in the form
of a Joint and Survivor Annuity that provides survivor benefits following
the Participant's death to the Participant's surviving spouse during the
spouse's lifetime at a rate equal to fifty percent of the rate at which
such benefits were payable to the Participant. This Joint and 50% Survivor
Annuity shall be considered the automatic form of payment for married
Participants. However, the Participant may elect, without regard to the
provisions of Section 6.5(a)(2), to receive a smaller benefit with
continuation of payments to the spouse at a rate of more than fifty percent
but less than or equal to 100% of the rate payable to the Participant
during his lifetime, which alternative Joint and Survivor Annuity shall be
equal in value to the automatic Joint and 50% Survivor Annuity. An
unmarried Participant shall automatically receive the value of his Vested
Accrued Benefit in the form of a life annuity. Such unmarried Participant,
however, may elect in writing to waive the life annuity. The election to
waive the life annuity must comply with the provisions of this Section 6.5
as if it were an election to waive the Joint and 50% Survivor Annuity by a
married Participant, but without having to satisfy the spousal consent
requirements of Section 6.5(a)(2).
(2) Any election by the Participant to waive the Joint and
Survivor Annuity must be in writing, must specify the optional form of
benefit and, if applicable, the Beneficiary designated by the
Participant and must specify that such optional form of benefit and
Beneficiary cannot be changed without the consent of his spouse unless
the spouse's consent acknowledges the spouse's right to limit consent
only to a
<PAGE>
specific Beneficiary or to a specific optional form of benefit and the
spouse voluntarily elects to relinquish both of such rights. Such
election shall be valid only if it is made during the election period
and is consented to by his spouse unless the Participant establishes
to the satisfaction of the Administrator that his spouse's consent
cannot be obtained (i) because his spouse cannot be located, or (ii)
because the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no Qualified Domestic Relations
Order which provides otherwise), or (iii) because of other
circumstances prescribed by Regulations, or (iv) because his spouse's
consent is not required by reason of the spouse's previous consent
which permits the Participant to change the form of benefit or
Beneficiary without any requirement of further consent by his spouse.
The consent of the Participant's spouse must be in writing, must
acknowledge the effect of the election and must be witnessed by a Plan
representative or notary public. Any consent by a spouse (or
establishment that the consent of a spouse may not be obtained) shall
be effective only with respect to such spouse. A Participant may
revoke in writing any previous election at any time during the
election period. There is no limit on the number of elections or
revocations that can be made. A revocation of a prior election may be
made by a Participant without his spouse's consent, but any subsequent
election will require a new consent from the Participant's spouse. For
purposes of this Section 6.5(a)(2), a change in the form of benefit or
Beneficiary by the Participant shall not be considered a revocation if
the previous consent of the spouse expressly permits the Participant
to change the form of benefit or Beneficiary without the requirement
of further consent by his spouse. Once a spouse has consented to a
Participant's election, such spouse's consent cannot be revoked unless
the Participant also revokes his election.
(3) The election period to waive the Joint and Survivor Annuity
shall be the ninety day period ending on the Annuity Starting Date.
(4) With regard to the election described in Section 6.5(a)(2),
the Administrator shall provide to the Participant no less than thirty
days and no more than ninety days before the Annuity Starting Date a
written explanation of:
(i) the terms and conditions of the Joint and Survivor
Annuity,
(ii) the Participant's right to make an election to waive
the Joint and Survivor Annuity,
(iii) the right of the Participant's spouse to consent to
any election to waive the Joint and Survivor Annuity,
(iv) the right of the Participant to revoke such election,
and the effect of such revocation, and
<PAGE>
(v) the material features and the relative values of the
various optional forms of benefit under the Plan.
(b) In the event a married Participant elects, pursuant to Section
6.5(a)(2), not to receive his Vested Accrued Benefit in the form of a Joint
and Survivor Annuity or, if such Participant is not married, in the form of
a life annuity, then the Administrator, pursuant to the election of the
Participant, shall direct the distribution of a Participant's Accrued
Benefit in one or more of the following methods which are permitted under
the Adoption Agreement:
(1) One lump-sum payment in cash or in property.
(2) Payments for a period certain in monthly, quarterly,
semiannual or annual cash installments. In order to provide such
installments, the Employer may direct that an amount equal to the
Participant's Vested Accounts be segregated from the general Trust
Fund and be invested separately, and that such separate fund be used
for the payment of installments.
(3) Purchase of an annuity providing payments for the life of the
Participant or for the joint lives of the Participant and his
designated Beneficiary, with or without a period certain, or for a
period certain only.
At the written election of the Participant, any lump sum payment may be
transferred directly to the trustee or other funding agent of another qualified
retirement plan. Installment payments must commence and must be made over a
period or term which satisfies the requirements of Section 6.5(d). Any annuity
distributed to a Participant shall be nontransferable and the terms of such
annuity shall comply with the requirements of the Plan. The provisions of this
Section 6.5(b) are also subject to the provisions of Section 6.5(c)(2).
(c)(1) In the case of a Participant whose termination of employment
constitutes a Normal or Early Retirement or is on account of Total and
Permanent Disability, the payment of a Participant's Accrued Benefit shall
begin at such time as elected by the Participant. In the case of a
Participant whose employment is terminated for a reason other than Normal
or Early Retirement, Total or Permanent Disability or death, the payment of
a Participant's Vested Accrued Benefit shall begin at such time as elected
by the Participant after he has satisfied the conditions, if any, specified
by the Employer in the Adoption Agreement. Notwithstanding the foregoing
provisions of this Section 6.5(c)(1), payment of a Participant's Accrued
Benefit shall not begin less than thirty days after the explanation
described in Section 6.5(a)(4) is given unless, however, Section 6.13
applies, in which event, payment may begin before then if the Administrator
clearly informs the Participant of his right to a period of thirty days
after receiving said explanation to consider his decision whether or not to
elect payment (and,
<PAGE>
if applicable, the method of payment) and the Participant, after receiving
the explanation, affirmatively elects the payment of his Accrued Benefit. The
provisions of this Section 6.5(c)(1) are subject to the provisions of Sections
6.5(d) and 6.7.
(2) Notwithstanding the provisions of Section 6.5(c)(1), if the
Vested Accrued Benefit of a Participant does not exceed $3,500, then
the Administrator shall direct that the Participant's Vested Accrued
Benefit be paid as soon as administratively practicable in the form of
a single lump sum payment. No lump sum payment may be made under this
Section 6.5(c)(2) after the Annuity Starting Date unless the
Participant and, in the case in which benefits are being paid in the
form of a Joint and Survivor Annuity, his spouse, consent in writing
to such payment.
(3) In the event the payment of a Participant's Vested Accrued
Benefit is to be deferred (as a result of either the Participant's
election or otherwise), the Employer may direct that the Vested
portion of the Participant's Accounts be segregated from the general
Trust Fund and be invested separately.
(d)(1) Subject to Section 6.5(a), the requirements of this Section
6.5(d) shall apply to any distribution of a Participant's Accrued Benefit
and will take precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this Section 6.5(d) apply to
calendar years beginning after December 31, 1984. All distributions
required under this Section 6.5(d) shall be determined and made in
accordance with the proposed Regulations under Code Section 401(a)(9),
including the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the proposed Regulations.
(2) The entire Accrued Benefit of a Participant must be
distributed or begin to be distributed no later than the Participant's
required beginning date.
(3) As of the first distribution calendar year, distributions, if
not made in a lump sum, may only be made over one of the following
periods (or a combination thereof):
(i) the life of the Participant,
(ii) the life of the Participant and a designated
Beneficiary,
(iii) a period certain not extending beyond the life
expectancy of the Participant, or
(iv) a period certain not extending beyond the joint life
and last survivor expectancy of the Participant and a designated
Beneficiary.
<PAGE>
(4) If the Participant's Accrued Benefit is to be distributed in
other than a lump sum, the following rules shall apply on or after the
required beginning date:
(i) If a Participant's benefit is to be distributed over a
period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's designated Beneficiary, the
amount required to be distributed for each calendar year,
beginning with distributions for the first distribution calendar
year, must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy.
(ii) For calendar years beginning before January 1, 1989, if
the Participant's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least fifty
percent of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant.
(iii) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first distribution calendar year, shall not
be less than the quotient obtained by dividing the Participant's
benefit by the lesser of (A) the applicable life expectancy or
(B) if the Participant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
Regulations.
(iv) The minimum distribution required for the Participant's
first distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution for
the distribution calendar year in which the Participant's
required beginning date occurs, must be made on or before
December 31 of that distribution calendar year.
(v) If the Participant's benefit is distributed in the form
of an annuity, distributions thereunder shall be made in
accordance with the requirements of Code Section 401(a)(9) and
the proposed Regulations thereunder.
(5) (i) The term "applicable life expectancy" means the life
expectancy of the Participant (or the joint life and last survivor
expectancy of the Participant and his designated Beneficiary)
calculated using the attained age of the Participant and, if
applicable, his designated Beneficiary as of the Participant's
birthday and, if applicable, his designated Beneficiary's birthday in
the applicable calendar year
<PAGE>
reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is
being recalculated, the applicable life expectancy shall be the
life expectancy as so recalculated. The applicable calendar year
shall be the first distribution calendar year, and if life
expectancy is being recalculated, each such succeeding calendar
year.
(ii) For purposes of this Section 6.5(d), the life
expectancy of a Participant and, if applicable, a
Participant's spouse shall be recalculated annually in
accordance with Regulations or shall not be so recalculated,
as specified in the Adoption Agreement. If the Adoption
Agreement so provides, a Participant may elect whether his
life expectancy, that of his spouse, or both, will be
recalculated and such election, once made, shall be
irrevocable. If no election is made by the Participant prior
to the time distributions must commence, then the life
expectancy of the Participant and his spouse shall not be
recalculated. Life expectancies shall be computed using the
expected return multiples in Tables V and VI of Regulation
1.72-9.
(iii) The term "designated Beneficiary" means the
individual who is designated as the Beneficiary under the
Plan in accordance with Code Section 401(a)(9) and the
proposed Regulations thereunder.
(iv) The term "distribution calendar year" means a
calendar year for which a minimum distribution is required.
The first distribution calendar year is the calendar year
immediately preceding the calendar year which contains the
Participant's required beginning date.
(v) The term "Participant's benefit" means the
Participant's Accrued Benefit as of the last Valuation Date
in the calendar year immediately preceding the distribution
calendar year (valuation calendar year) increased by the
amount of any contributions or Forfeitures allocated to the
Participant's Accounts during the valuation calendar year
and after such Valuation Date and decreased by distributions
made during the valuation calendar year and after such
Valuation Date. However, if any portion of the minimum
distribution for the first distribution calendar year is
made in the second distribution calendar year on or before
the required beginning date, the amount of the minimum
distribution made in the second distribution calendar year
shall be treated as if it had been made in the immediately
preceding distribution calendar year.
(vi) Except as provided below, the term "required
beginning date" means the April 1 of the calendar year
following
<PAGE>
the calendar year in which the Participant attains age
seventy and one-half. However, in the case of a Participant
who attains age seventy and one-half before January 1, 1988,
the required beginning date of a Participant is the April 1
of the calendar year following the later of (A) the calendar
year in which the Participant attains age seventy and
one-half or (B) the calendar year in which the Participant
retires or, if earlier, the calendar year with or within
which ends the Plan Year in which the Participant becomes a
Five Percent Owner. Section 6.5(d)(6)(vi)(B) shall not apply
to any Participant unless the Participant was not a Five
Percent Owner at any time during the Plan Year ending with
or within the calendar year in which the Participant
attained age sixty-six and one-half or during any subsequent
Plan Year. Notwithstanding the foregoing provisions of this
Section 6.5(d)(vi) to the contrary, the required beginning
date of a Participant who is not a Five Percent Owner, who
attains age seventy and one-half during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
(6) Subject to the Participant's spouse's right of consent
afforded under Section 6.5(a)(2), the restrictions imposed by Section
6.5(d) shall not apply if a Participant has, prior to January 1, 1984,
made a written designation to have his Vested Accrued Benefit paid in
an alternative method acceptable under Code Section 401(a) as in
effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
(e) Benefits paid in the form of installments or under an annuity
under Sections 6.5(b)(2) and (3) shall not be suspended in the event a
Participant, who terminated employment, is reemployed by the Employer or
any Affiliated Employer.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Subject to the provisions of Section 6.6(h)(2), upon the death of
a Participant subsequent to the Annuity Starting Date, his Beneficiary
shall be entitled to whatever death benefit may be available under the
settlement arrangements pursuant to which the Participant's benefit is made
payable. Upon the death of a Participant prior to the Annuity Starting
Date, death benefits (including any Pre-Retirement Survivor Annuity payable
to the Participant's surviving spouse) shall, subject to the provisions of
Sections 6.6(f) and (h), be paid at such time as directed by the
Beneficiary (or surviving spouse in the case of a Pre-Retirement Survivor
Annuity) and in the manner provided for under Section 6.6(g).
Notwithstanding the foregoing provisions of this Section 6.6(a) to the
contrary, after the Participant's death, a surviving spouse may elect to
receive the amount that would otherwise have been paid to the surviving
spouse as a Pre-Retirement Survivor Annuity in any other form of benefit
permitted under Section 6.6(g).
<PAGE>
(b) Any election by a Participant to waive the Pre-Retirement Survivor
Annuity must be in writing, must specify the Beneficiary designated by the
Participant and must specify that such Beneficiary cannot be changed
without the consent of his spouse unless the spouse's consent acknowledges
the spouse's right to limit consent only to a specific Beneficiary and the
spouse voluntarily elects to relinquish such right. The Participant's
election will be valid only if it is made during the election period and is
consented to by his spouse unless the Participant establishes to the
satisfaction of the Administrator that his spouse's consent cannot be
obtained (1) because his spouse cannot be located, or (2) because the
Participant is legally separated or has been abandoned (within the meaning
of local law) and the Participant has a court order to such effect (and
there is no Qualified Domestic Relations Order which provides otherwise),
or (3) because of other circumstances prescribed by Regulations or (4)
because his spouse's consent is not required by reason of the spouse's
previous consent which permits the Participant to change a Beneficiary
without any requirement of further consent by his spouse. The consent of
the Participant's spouse must be in writing, must specify the Beneficiary
designated by the Participant, must acknowledge the effect of the election
and must be witnessed by a Plan representative or notary public. Any
consent by a spouse (or establishment that the consent of a spouse may not
be obtained) shall be effective only with respect to such spouse. A
Participant may revoke in writing any previous election at any time during
the election period. There is no limit on the number of elections or
revocations that can be made. A revocation of a prior election may be made
by a Participant without his spouse's consent, but any subsequent election
will require a new consent from the Participant's spouse. Once a spouse has
consented to a Participant's election, the spouse's consent cannot be
revoked unless the Participant also revokes his election. For purposes of
this Section 6.6(b), a change in Beneficiary by the Participant shall not
be considered a revocation if the previous consent of the spouse expressly
permits the Participant to change a Beneficiary without the requirement of
further consent by his spouse.
(c) The election period to waive the Pre-Retirement Survivor Annuity
shall begin on the first day of the Plan Year in which the Participant
attains age thirty-five and shall end on the date of the Participant's
death. A waiver of the Pre-Retirement Survivor Annuity (with spousal
consent) may be made prior to the election period specified in the
preceding sentence provided a written explanation of the Pre-Retirement
Survivor Annuity is given to the Participant and such waiver becomes
invalid as of the first day of the Plan Year in which the Participant
attains age thirty-five.
(d) The Administrator shall provide each Participant within the
applicable period a written explanation of the Pre-Retirement Survivor
Annuity containing information comparable to that required pursuant to
Section 6.5(a)(4). For purposes of this Section 6.6(d), the term
"applicable period" means, with respect to a Participant, whichever of the
following periods ends last:
<PAGE>
(1) The period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two and ending with the last
day of the Plan Year preceding the Plan Year in which the Participant
attains age thirty-five.
(2) A reasonable period after he becomes an Active Participant.
(3) A reasonable period ending after Code Section 401(a)(11)
applies to the Participant.
(4) A reasonable period after termination of employment in the
case of a Participant who terminates before attaining age thirty-five.
For purposes of Sections 6.6(d)(2) through (4), a reasonable period is the
end of the one-year period beginning with the date on which the applicable event
occurs.
(e) The Pre-Retirement Survivor Annuity provided for in this Section
6.6 shall apply only to Participants who are credited with an Hour of
Service on or after August 23, 1984. Participants who are not credited with
an Hour of Service on or after August 23, 1984, shall be provided with
rights to the Pre-Retirement Survivor Annuity in accordance with Section
303(e)(2) of the Retirement Equity Act of 1984.
(f) If the value of any death benefit (including the Pre-Retirement
Survivor Annuity) does not exceed $3,500, then the Administrator shall
direct that such death benefit be paid as soon as administratively
practicable after the Participant's death in the form of a single lump-sum
payment. No distribution may be made under this Section 6.6(f) after
benefit payments have commenced unless the Beneficiary (or surviving spouse
in the case of the Pre-Retirement Survivor Annuity) consents in writing.
(g) Death benefits not paid in the form of a Pre-Retirement Survivor
Annuity shall be paid to the Participant's Beneficiary (including a spouse
who waives the Pre-Retirement Survivor Annuity after the Participant's
death) in one or more of the following methods, as elected by the
Beneficiary, which are permitted under the Adoption Agreement:
(1) One lump-sum payment in cash or in property.
(2) Payment for a period certain in monthly, quarterly,
semi-annual or annual cash installments. In order to provide such
installments, the Employer may direct that an amount equal to that
part of the Participant's Vested Accrued Benefit payable to such
Beneficiary be segregated from the general Trust Fund and be invested
separately, and that such separate fund be used for the payment of
installments.
<PAGE>
(3) Purchase of an annuity providing payments for the life of the
Beneficiary, with or without a period certain, or for a period certain
only.
Installment payments must commence and must be made over a period or term
which satisfies the requirements of Section 6.6(h). Any annuity distributed to a
Beneficiary shall be nontransferable and the terms of such annuity shall comply
with the requirements of the Plan.
(h) Notwithstanding any provision in the Plan to the contrary,
distributions made on or after January 1, 1985, whether under the Plan or
through the purchase of an annuity, shall be made in accordance with the
following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder, the provisions of which are
incorporated herein by reference.
(1) If it is determined, pursuant to Regulations, that the
distribution of a Participant's Vested Accrued Benefit has begun and
the Participant dies before it has been distributed to him, the
remaining portion of his Vested Accrued Benefit shall be distributed
at least as rapidly as under the method of distribution selected
pursuant to Section 6.5 which was in effect on the date of his death.
(2) If a Participant dies before the distribution of his Vested
Accrued Benefit has begun or before distributions are deemed to have
begun pursuant to Regulations under Code Section 401(a)(9), then his
Vested Accrued Benefit shall be distributed to his Beneficiary in
accordance with the following rules subject to the selections made in
the Adoption Agreement and Section 6.6(h)(3):
(i) In the event a Beneficiary is not a designated
Beneficiary or in the event the Employer has so specified in the
Adoption Agreement, the Participant's entire Vested Accrued
Benefit shall be distributed to his Beneficiary by the December
31 of the calendar year in which occurs the fifth anniversary of
the Participant's death;
(ii) In the event a Beneficiary is a designated Beneficiary
and the Employer has so specified in the Adoption Agreement, a
Participant's Vested Accrued Benefit shall be distributed over
the life of such designated Beneficiary (or over a period not
extending beyond the life expectancy of such designated
Beneficiary) provided such distribution begins not later than the
December 31 of the calendar year immediately following the
calendar year in which the Participant dies;
(iii) In the event the Participant's spouse (determined as
of the date of the Participant's death) is his designated
Beneficiary, the provisions of Section
<PAGE>
6.6(h)(2)(ii), if selected by the Employer in the Adoption Agreement, shall
apply except that the requirement that distributions commence within one year of
the Participant's death shall not apply. In lieu thereof, distributions must
commence on or before the later of (A) the December 31 of the calendar year
immediately following the calendar year in which the Participant dies or (B) the
December 31 of the calendar year in which the Participant would have attained
age seventy and one-half. If the surviving spouse dies before distributions to
such spouse begin, then the provisions of this Section 6.6(h)(2) shall apply as
if the spouse were the Participant, except, however, that the provisions of this
Section 6.6(h)(2)(iii) shall not apply to the surviving spouse of such spouse.
Notwithstanding the foregoing provisions of this Section 6.6(h)(2) or any
selections made in the Adoption Agreement, the commencement of the payment of a
Pre-Retirement Survivor Annuity to the Participant's surviving spouse may be
postponed until the later of (iv) the December 31 of the calendar year
immediately following the calendar year in which the Participant dies or (v) the
December 31 of the calendar year in which the Participant would have attained
age seventy and one-half.
(3) If the Adoption Agreement so provides, a designated
Beneficiary may elect to receive his benefits at any time and in any
manner that satisfy the provisions of Section 6.6(h)(2). The election
by a designated Beneficiary must be made not later than the December
31 of the calendar year following the calendar year of the
Participant's death. However, with respect to a designated Beneficiary
who is the Participant's surviving spouse, the election must be made
by the earlier of (i) the December 31 of the calendar year immediately
following the calendar year in which the Participant dies or, if
later, the calendar year in which the Participant would have attained
age seventy and one-half or (ii) the December 31 of the calendar year
which contains the fifth anniversary of the date of the Participant's
death. An election by a designated Beneficiary must be in writing and
shall be irrevocable as of the last day of the election period stated
herein. In the absence of an election by a designated Beneficiary who
is not the surviving spouse of the Participant, the provisions of
Section 6.6(h)(2)(i) shall apply. In the absence of an election by a
designated Beneficiary who is the surviving spouse of the Participant
the provisions of Sections 6.6(h)(2)(ii) and (iii) shall apply.
(4) If a Participant's benefit is to be distributed over a period
not extending beyond the life expectancy of the designated
Beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar
year,
<PAGE>
must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy. If a
Participant's benefit is to be distributed in the form of an annuity,
distributions thereunder shall be made in accordance with the
requirements of Code Section 401(a)(9) and the proposed Regulations
thereunder.
(5) (i) The term "applicable life expectancy" means the life
expectancy of the Participant's designated Beneficiary in the
applicable calendar year reduced by one for each calendar year which
has elapsed since the date life expectancy was first calculated. If,
in the case of the Participant's surviving spouse, life expectancy is
being recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be
the first distribution calendar year and, if life expectancy is being
recalculated, each such succeeding calendar year.
(ii) For purposes of this Section 6.6(h), the life
expectancy of a Participant's spouse shall be recalculated
annually in accordance with Regulations or shall not be so
recalculated, as specified in the Adoption Agreement. If the
Adoption Agreement so provides, the Participant's spouse may
elect whether his life expectancy will be recalculated and such
election, once made, shall be irrevocable. If no election is made
by the Participant's spouse prior to the time distributions must
commence, then the life expectancy of the Participant's spouse
shall not be recalculated. Life expectancy shall be computed
using the return multiples in Tables V and VI of Regulation
Section 1.72-9.
(iii) The term "designated Beneficiary" shall mean that term
as defined in Section 6.5(d)(6)(iii).
(iv) The term "distribution calendar year" means a calendar
year for which a minimum distribution is required. The first
distribution calendar year is the calendar year in which
distributions must begin as described in Sections 6.6(h)(2)(ii)
and (iii).
(v) The term "Participant's benefit" means the Participant's
Accrued Benefit as of the last Valuation Date in the calendar
year immediately preceding the distribution calendar year
(valuation calendar year) increased by the amount of any
contributions or Forfeitures allocated to the Participant's
Accounts during the valuation calendar year and after such
Valuation Date and decreased by distributions made during the
valuation calendar year and after such Valuation Date.
<PAGE>
(6) Subject to the Participant's spouse's right of consent
afforded under the Plan, the restrictions imposed by this Section
6.6(h) shall not apply if a Participant has, prior to January 1, 1984,
made a written designation to have his Vested Accrued Benefit paid in
an alternative method acceptable under Code Section 401(a) as in
effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
6.7 TIME OF DISTRIBUTION
Unless a Participant elects in writing to defer the receipt of his Vested
Accrued Benefit, the payment of his Vested Accrued Benefit shall begin not later
than sixty days after the close of the Plan Year in which the latest of the
following events occurs: (a) the date on which the Participant attains the
earlier of age sixty-five or the Normal Retirement Age specified in the Adoption
Agreement; (b) the tenth anniversary of the date on which the Participant became
an Active Participant under the Plan; or (c) the date the Participant terminates
his service with the Employer or any Affiliated Employer. If the latest of the
events described in the preceding sentence occurs prior to the Participant's
attaining age sixty-two, then the Participant shall be treated as having elected
to defer the receipt of his Vested Accrued Benefit until the attainment of that
age. If a Participant elects in writing to defer the receipt of his Vested
Accrued Benefit, such writing must be signed by the Participant and must
designate the form of benefit and the time at which such benefit shall commence.
Any such designation must be consistent with the provisions of Section 6.5(d).
6.8 DISTRIBUTION TO INCOMPETENTS
If a Participant or Beneficiary is declared incompetent by a court having
jurisdiction, and a guardian of his estate is appointed, any benefits to which
he is entitled shall be paid to the guardian.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that benefits payable to a Participant or his Beneficiary
hereunder shall remain unpaid solely by reason of the inability of the
Administrator, after sending a registered letter, return receipt requested, to
the last known address of the Participant or his Beneficiary, and after further
diligent effort, to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to the allocation of the Forfeiture, the amount so forfeited shall be
restored, first from Forfeitures, if any, then from earnings of the Trust Fund,
if any, and then from an additional Employer contribution if necessary.
Notwithstanding the above, in the event a Participant or his Beneficiary cannot
be located upon termination of the Plan, any amount payable to such Participant
or Beneficiary shall be transferred at the earliest possible date to the State
of the Participant's or Beneficiary's last known address pursuant to the terms
of that State's abandoned property law. Upon such transfer, the Trustee,
Employer and Administrator shall have no further liability or responsibility for
the amount so transferred.
<PAGE>
6.10 IN-SERVICE DISTRIBUTIONS
At such time as a Participant shall have satisfied the conditions, if any,
specified in the Adoption Agreement, the Administrator, at the election of the
Participant, shall direct the distribution to him of all or any portion of his
Employer Contribution Account, in the case of a Profit Sharing Plan or Money
Purchase Plan, and the Accounts specified in the Adoption Agreement, in the case
of a 401(k) Profit Sharing Plan, determined as of the preceding Valuation Date.
In the case of a Money Purchase Plan, however, a distribution pursuant to this
Section 6.10 cannot be made prior to the Participant's attainment of Normal
Retirement Age. Notwithstanding the foregoing, the amount distributed shall not
exceed the Vested portion of any such Account and, unless it has been five or
more years since the date on which an Employee became an Active Participant or
unless the distribution is being made on account of a stated event (for example,
attainment of a stated age, layoff, disability), the amount so distributed
cannot be greater than the Vested portion of such Account reduced by the amount
of any Employer contributions made within two years of the date of distribution.
(For this purpose the two-year period is measured from the date contributions
are actually made and not from the date as of which they are allocated.) In the
event such a distribution is made, an Active Participant shall continue to be
treated as an Active Participant for all purposes under the Plan. Any
distribution made pursuant to this Section 6.10 shall be made in a manner that
is consistent with and satisfies the provisions of Section 6.5. If the Account
from which a distribution is made is not fully Vested at the time of the
distribution, a Participant's Vested percentage shall be determined pursuant to
the provisions of Section 6.4(i). The Employer may direct the Administrator to
charge the Participant or his Account for the fee assessed by the Administrator
to process a distribution under this Section 6.10.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) For Profit Sharing Plans, if elected in the Adoption Agreement,
the Employer, at the request of the Participant, shall direct the
distribution to any Participant of an amount up to the lesser of 100% of
his Vested Employer Contribution Account, determined as of the preceding
Valuation Date or the amount necessary to satisfy an immediate and heavy
financial need of the Participant. The Employer, on the basis of all
relevant facts and circumstances, shall determine whether a Participant has
an immediate and heavy financial need. An immediate and heavy financial
need shall include but shall not be limited to the following circumstances:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or expenses necessary for
such individuals to obtain medical care;
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Payment of funeral expenses for a member of the Participant's
family;
<PAGE>
(4) Payment of tuition, related educational fees, and room and
board expenses for the next twelve months of post-secondary education
for the Participant, or his spouse, children or dependents; or
(5) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) Any distribution made pursuant to this Section 6.11 shall be made
in a manner which is consistent with and satisfies the provisions of
Section 6.5. If the Participant's Employer Contribution Account is not
fully Vested at the time of the distribution, his Vested percentage shall
be determined pursuant to the provisions of Section 6.4(i). In the event
that a hardship distribution is made to a Participant who is an Active
Participant, such Participant shall continue to be treated as an Active
Participant for all purposes under the Plan.
(c) The Employer may direct the Administrator to charge the
Participant for the fee assessed by the Administrator to process a
distribution under this Section 6.11.
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any Alternate Payee under a
Qualified Domestic Relations Order. Furthermore, a distribution to an Alternate
Payee shall be permitted if such distribution is authorized by a Qualified
Domestic Relations Order, even if the affected Participant has not reached the
"earliest retirement age" within the meaning of Code Section 414(p).
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS
If elected in the Adoption Agreement, the following shall apply:
(a) The Participant shall be prohibited from having his Vested Accrued
Benefit paid in the form of a life annuity;
(b) Upon the death of the Participant, the Participant's entire
Accrued Benefit will be paid to his surviving spouse or, if there is no
surviving spouse or if the surviving spouse has consented to the
designation of a Beneficiary in a manner consistent with the provisions of
Section 6.6(b), to the Participant's designated Beneficiary; and
(c) The provisions of Sections 6.5 and 6.6, to the extent they relate
to the Joint and Survivor Annuity and Qualified Pre-Retirement Survivor
Annuity, shall be inoperative with respect to the Plan.
This Section 6.13 shall not apply to any Participant if it is determined
that this Plan is a direct or indirect transferee of a defined benefit plan,
money purchase plan or target benefit plan, or of a stock bonus plan or profit
sharing plan which was subject to the survivor annuity requirements of Code
Sections
<PAGE>
401(a)(11) and 417 with respect to such Participant. However, this Section 6.13
shall apply to such Participant to the extent that the amounts so transferred
are accounted for separately from the Participant's other Accounts under the
Plan
6.14 DIRECT ROLLOVERS
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this part, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover.
(b) Definitions.
(1) The term "eligible rollover distribution" means any
distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not
include: (i) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or
more; (ii) any distribution to the extent such distribution is
required under Code Section 401(a)(9); (iii) the portion of any
distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to Employer securities); and (iv) any other distributions(s)
that is reasonably expected to total less than $200 during a year.
(2) The terms "eligible retirement plan" means an individual
retirement account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust described in
Code Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(3) The term "distributee" includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the Alternate Payee under a Qualified Domestic Relations Order
are distributees with regard to the interest of the spouse or former
spouse.
(4) The term "direct rollover" means a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the funding policy and method determined by the
Employer pursuant to Section 2.3(b), to invest, manage, and control the
Trust;
(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to a Participant or, in the event of his death,
to his Beneficiary;
(c) To maintain records of receipts and disbursements and to furnish
to the Employer or Administrator or both for each Plan Year a written
annual report pursuant to Section 7.8.
Notwithstanding the foregoing provisions of this Section 7.1, the
responsibility described in Section 7.1(a) above shall not apply to Emjay
Corporation or any other person affiliated with Emjay Corporation if it is a
Trustee of the Plan.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
The Trustee shall maintain a Trust Fund for the purpose of accumulating the
funds necessary to pay benefits under the Plan. The Trustee shall invest and
reinvest the principal and income of the Trust Fund, without distinction between
principal and income, in AAL Mutual Funds or such other investments permitted by
AAL Capital Management Corporation or its successor. In making investment
decisions, the Trustee shall at all times consider, among other factors, the
short and long-term financial needs of the Plan on the basis of information
furnished by the Employer. The investment powers and duties described in this
Section 7.2 shall be exercised at the direction of the Employer if Emjay
Corporation or any other person affiliated with Emjay Corporation is a Trustee
of the Plan; provided, however, that in the event the Employer neglects to
provide appropriate directions regarding the investment of the Trust Fund, Emjay
Corporation (or any such affiliated person) shall invest any uninvested cash in
any AAL money market mutual fund or in any other investment for the short-term
holding of cash that is permitted by AAL Management Corporation or its
successor.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of this Plan, shall
have the following powers and authorities to be exercised in the Trustee's sole
discretion except as otherwise provided in Section 7.3(m) below:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee,
by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the
<PAGE>
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition, with or
without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or
to consent to, or otherwise participate in, corporate reorganizations or
other changes affecting corporate securities, and to delegate discretionary
powers, and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to stocks,
bonds, securities, or other property;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees,
and to hold any investments in bearer form, but the books and records of
the Trustee shall at all times show that all such investments are part of
the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all or any part of
the Trust Fund; and no person lending money to the Trustee shall be bound
to see to the application of the money lent or to inquire into the
validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances as
the Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;
(g) To accept and retain for such time as it may deem advisable any
securities or other property received or acquired by it as Trustee
hereunder, whether or not such securities or other property would normally
be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits
and legal and administrative proceedings; provided, however, the Trustee
shall be under no duty or obligation to commence or defend suits or legal
or administrative proceedings or to represent the Plan in such suits and
proceedings unless the Trustee shall have been indemnified to its
satisfaction against all expenses and liabilities which the Trustee may
sustain or anticipate by reason thereof;
<PAGE>
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
(k) To pool all or any part of the assets of the Trust Fund, from time
to time, with the assets of any other qualified plan of the Employer or any
Affiliated Employer, and to commingle such assets and make joint or common
investments and carry joint accounts on behalf of this Plan and such other
plan or plans, allocating undivided shares or interests in such investments
or accounts or any pooled assets of the two or more plans in accordance
with their respective interests;
(l) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(m) The powers and authorities set forth in paragraphs (a), (b), (c),
(e), (f), (g), and (k) shall only be exercised at the direction of the
Employer if Emjay Corporation or any other person affiliated with Emjay
Corporation is a Trustee of the Plan.
7.4 PARTICIPANT DIRECTION OF INVESTMENTS
If elected in the Adoption Agreement, a Participant may direct the
investment of those of his Accounts to which the right to direct the investment
thereof has been extended as set forth in the Adoption Agreement. The Employer
may select two or more investment alternatives for the investment of a
Participant's Accounts to which the right to direct the investment thereof
applies. The Employer shall establish rules and regulations relating to the
investment of a Participant's Accounts under this Section 7.4(b), including but
not limited to rules relating to the frequency with which a Participant may
change the investment of his Accounts or relating to the investment of a
Participant's Accounts in the event of the Participant's failure to select any
such alternatives.
7.5 LOANS TO PARTICIPANTS
(a) If permitted in the Adoption Agreement, the Trustee, as directed
by the Employer, may make loans to Participants under the following
circumstances: (1) loans shall be made available to all Participants and
Beneficiaries on a reasonably equivalent basis; (2) loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Participants; (3) loans shall bear a
reasonable rate of interest; and (4) loans shall be adequately secured.
(b) Loans shall not be made to any Shareholder-Employee or
Owner-Employee unless an exemption for such loan is obtained pursuant to
Act Section 408 and further provided that such loan would not be subject to
tax pursuant to Code Section 4975.
(c) The amount of any loan made pursuant to this Section 8.5 shall
ordinarily be limited to the lesser of:
<PAGE>
(1) $50,000, reduced by the excess (if any) of the highest
outstanding balance of loans to the Participant during the one year
period ending on the day before the date on which such loan is made,
over the outstanding balance of loans to the Participant on the date
on which such loan is made, or
(2) the greater of (i) one-half of the Participant's Vested
Accrued Benefit under the Plan, or (ii) $10,000.
For purposes of this limit, this Plan and all other plans of the Employer
and any Affiliated Employer shall be treated as one plan. In determining whether
the loan limitation has been exceeded, there shall be taken into account all
other loans outstanding at the time the loan is to be made. Notwithstanding the
foregoing provisions of this Section 7.5(c) to the contrary, in no event shall
the amount of any loan plus the amount of loans then outstanding from this Plan
exceed eighty percent of the Participant's Vested Accrued Benefit.
(d) All loans shall be secured with such property, including the
Participant's Vested Accrued Benefit (but not including that portion of his
Accrued Benefit attributable to his Qualified Voluntary Employee
Contribution Account) as the Trustee deems to be adequate under the
circumstances. However, if a Participant's Vested Accrued Benefit is to be
used as security for a loan, not more than fifty percent of such Vested
Accrued Benefit may be so used.
(e) Loans shall ordinarily provide for level amortization with
payments to be made not less frequently than quarterly over a period which
generally shall not exceed five years. However, loans used to acquire any
dwelling unit which, within a reasonable time, is to be used (determined at
the time the loan is made) as a principal residence of the Participant may
provide for a period of repayment that exceeds five years. Notwithstanding
the foregoing, loans made prior to January 1, 1987, which are used to
acquire, construct, reconstruct or substantially rehabilitate any dwelling
unit which, within a reasonable period of time is to be used (determined at
the time the loan is made) as a principal residence of the Participant or a
member of his family (within the meaning of Code Section 267(c)(4)) may
provide for periodic repayment over a reasonable period of time that may
exceed five years. Additionally, loans made prior to January 1, 1987, may
provide for periodic payments which are made less frequently than quarterly
and which do not necessarily result in level amortization.
(f) An assignment or pledge of any portion of a Participant's Accrued
Benefit and a loan, pledge, or assignment with respect to any insurance
Contract purchased under the Plan, shall be treated as a loan under this
Section 7.5.
(g) Any loan made pursuant to this Section 7.5 after August 18, 1985,
which is secured by the Vested Accrued Benefit of a Participant, shall
require the written consent of the Participant's spouse. No spousal consent
shall be required,
<PAGE>
however, if the Participant's Accrued Benefit subject to the security is
not in excess of $3,500 or if the Plan is not subject to the spousal
consent requirements on account of Section 6.13. Spousal consent shall be
obtained no earlier than the beginning of the ninety-day period that ends
on the date on which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must be witnessed by
a Plan representative or notary public. Such consent shall thereafter be
binding with respect to the consenting spouse or any subsequent spouse with
respect to that loan. A new consent shall be required if the loan secured
by the Participant's Vested Accrued Benefit is renegotiated, extended,
renewed or otherwise revised. Any security interest held by the Plan by
reason of an outstanding loan to the Participant shall be taken into
account in determining the amount of any death benefit including the
Pre-Retirement Survivor Annuity.
(h) Foreclosure on the note and attachment of security will occur at
the time of default on the loan. However, if the loan is secured, in the
case of a 401(k) Profit Sharing Plan, by the Participant's Elective
Account, Qualified Matching Account or Qualified Non-Elective Account or,
in the case of a Money Purchase Plan, by the Participant's Employer
Contribution Account, then, in the event of default, foreclosure on the
note and attachment of security will not occur until such time as the
Vested Accrued Benefit of the Participant may be distributed under the
Plan. Notwithstanding the provisions of Section 7.4, the Employer may
direct that a loan be earmarked to one or more of the Accounts of a
borrowing Participant in the event of the Participant's bankruptcy, in the
event the amount of the loan (plus accrued interest) exceeds the Vested
Accrued Benefit of the Participant or in the event of any other
circumstance that requires the protection of the interests of the other
Participants. Any fees associated with the earmarking of a loan as provided
in the immediately preceding sentence may be charged to the Accounts of the
borrowing Participant.
(i) If elected in the Adoption Agreement, a loan shall be made to a
Participant only if necessary to satisfy an immediate and heavy financial
need of the Participant. The Employer, on the basis of all relevant facts
and circumstances, shall determine whether a Participant has an immediate
and heavy financial need. An immediate and heavy financial need shall
include but shall not be limited to the following circumstances:
(1) Expenses described in Code Section 213(d) previously incurred
by the Participant, his spouse, or any of his dependents (as defined
in Code Section 152) or expenses necessary for such individual to
obtain medical care;
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Funeral expenses for a member of the Participant's family;
<PAGE>
(4) Payment of tuition, related educational fees, and room and
board expenses for the next twelve months of post-secondary education
for the Participant, or his spouse, children or dependents; or
(5) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(j) The Employer shall specify in the Adoption Agreement what, if any,
minimum amount must be borrowed and whether a Participant can have more
than one loan outstanding at the same time. The Employer shall also
promulgate other rules and regulations relating to Participant loans
including but not limited to the frequency with which loans may be made and
whether the fees of the Trustee and Administrator applicable to the
origination and maintenance of the loan shall be charged to the borrowing
Participant or his Accounts. All such rules and regulations shall be
applied in a uniform and nondiscriminatory manner.
7.6 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator or Employer, the Trustee shall, from
time to time, in accordance with the terms of the Plan, make payments out of the
Trust Fund. The Trustee shall not be responsible in any way for the application
of such payments.
7.7 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as set forth in the
Trustee's regularly published fee schedule or as agreed upon in writing by the
Employer and the Trustee. However, an individual serving as Trustee who already
receives full-time pay from the Employer shall not receive compensation from the
Plan. In addition, the Trustee shall be reimbursed for any reasonable expenses,
including reasonable counsel fees incurred by it as Trustee. Until paid, all
such compensation and expenses shall constitute a liability of the Trust Fund.
However, the Employer may pay such compensation and expenses directly or may, in
the event such compensation and expenses have already been paid, reimburse the
Trust Fund. All taxes of any kind that may be levied or assessed under existing
or future laws upon, or in respect of, the Trust Fund or the income thereof,
shall be paid from the Trust Fund.
7.8 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date
or receipt of the Employer's contribution for each Plan Year, the Trustee, or
its agent, shall furnish to the Employer and Administrator a written statement
of account with respect to the Plan Year for which such contribution was made
setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
<PAGE>
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Employer, Administrator or both
deem appropriate.
The Employer, upon its receipt of each such statement of account, shall
acknowledge receipt thereof in writing and advise the Trustee of its approval or
disapproval thereof. Failure by the Employer to disapprove any such statement of
account within thirty days after its receipt thereof shall be deemed an approval
thereof. The approval by the Employer of any statement of account shall be
binding as to all matters embraced therein as between the Employer and the
Trustee to the same extent as if the account of the Trustee had been settled by
judgment or decree in an action for a judicial settlement of its account in a
court of competent jurisdiction in which the Trustee, the Employer and all
persons having or claiming an interest in the Plan were parties; provided,
however, that nothing herein contained shall deprive the Trustee of its right to
have its accounts judicially settled if the Trustee so desires.
7.9 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Employer shall engage an
independent qualified public accountant for that purpose. Such accountant
shall, after an audit of the books and records of the Plan in accordance
with generally accepted auditing standards and within a reasonable period
after the close of the Plan Year, furnish to the Employer, Administrator
and Trustee a report of his audit setting forth his opinion as to whether
any statements, schedules or lists, which are required by Act Section 103
or the Secretary of Labor to be filed with the Plan's annual report, are
presented fairly and in conformity with generally accepted accounting
principles applied consistently.
(b) All auditing and accounting fees shall be an expense of and may,
at the election of the Employer, be paid from the Trust Fund.
(c) If some or all of the information necessary to comply with Act
Section 103 is maintained by a bank, insurance company, or similar
institution, regulated and supervised and subject to periodic examination
by a state or federal agency, it shall transmit and certify the accuracy of
that information to the Administrator as provided in Act Section 103(b)
within 120 days after the end of the Plan Year or such other date as may be
prescribed under regulations of the Secretary of Labor.
7.10 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer,
at least thirty days before its effective date, a written notice of his
resignation.
(b) The Employer may remove the Trustee by sending, by registered or
certified mail, addressed to the Trustee at his last known address, at
least thirty days before its effective date, a written notice of his
removal.
<PAGE>
(c) Upon the death, resignation, incapacity or removal of any Trustee
who is the sole Trustee, the Employer shall appoint a successor. In the
case of a Trustee who is not the sole Trustee, the Employer may appoint a
successor. Any successor,upon accepting such appointment in writing and
delivering his written acceptance to the Employer, shall, without further
act, become vested with all the estate, rights, powers, discretions and
duties of his predecessor with like respect as if he were originally named
as a Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees, if any, shall have full authority to act under the
terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions and duties of his predecessor with the
like effect as if he were originally named as Trustee herein, immediately
upon the death, resignation, incapacity or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account
with respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (1) included as part of the annual
statement of account for the Plan Year required under Section 7.8 or (2)
set forth in a special statement. Any such special statement of account
should be rendered to the Employer not later than the due date of the
annual statement of account for the Plan Year. The procedures set forth in
Section 7.8 for the approval by the Employer of annual statements of
account shall apply to any special statement of account rendered hereunder
and approval by the Employer of any such special statement in the manner
provided in Section 7.8 shall have the same effect upon the statement as
the Employer's approval of an annual statement of account. No successor to
the Trustee shall have any duty or responsibility to investigate the acts
or transactions of any predecessor who has rendered all statements of
account required by Sections 7.8 and 7.10.
7.11 TRANSFER OF INTEREST
The Trustee, on behalf of any Participant, may accept funds transferred
from another trust forming part of a pension, profit sharing or stock bonus plan
meeting the requirements of Code Section 401(a) or a "conduit" Individual
Retirement Account meeting the requirements of Code Section 408, provided the
conditions precedent to such transfer set forth in Section 4.5 are satisfied.
The Trustee may act upon the direction of the Administrator or Employer without
determining the facts concerning a transfer.
7.12 TRUSTEE INDEMNIFICATION
The Employer agrees to indemnify and save harmless the Trustee against any
and all claims, losses, damages, expenses and liabilities the
<PAGE>
Trustee may incur in the exercise and performance of the Trustee's powers and
duties hereunder, unless the same are determined to be due to gross negligence
or willful misconduct.
7.13 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
In the event two or more persons are acting as Trustee hereunder, the
Trustees may allocate specific responsibilities under the Plan among themselves
in which event the Trustees shall apprise the Employer and the Administrator of
the manner in which such responsibilities have been allocated. Each Trustee
shall be responsible only for its allocated responsibilities and shall not be
liable for any act or failure to act by any other Trustee to the extent
permitted under the Act.
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend this Plan
subject to the limitations of this Section 8.1. However, any amendment
which affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's
written consent. Any such amendment shall become effective as provided
therein upon its execution.
(b) The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Code Section 415 or 416 and (3) add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan. If the Employer amends the Plan
for any other reason, including a waiver of the minimum funding requirement
under Code Section 412(d), then the Employer will no longer be treated as
maintaining this Prototype Plan (as defined in Section 4.4(f)(9)) and will
instead be considered to have an individually designed plan.
(c) AAL Capital Management Corporation, the sponsor of this Prototype
Plan, may amend this Plan, without the Employer's consent, in order to
conform the Plan to any requirement for qualification under the Code. Any
such amendment, however, shall not amend the Plan in any manner which would
modify any election made by the Employer in the Adoption Agreement without
the Employer's written consent. AAL Capital Management Corporation shall
provide a copy of any such amendment to each Employer who has adopted the
Prototype Plan after first having received a ruling or favorable
determination (if such ruling or favorable determination is required) from
the Internal Revenue Service that the Plan as amended qualifies under Code
Section 401(a).
(d) No amendment to the Plan shall be effective if it (1) authorizes
or permits any part of the Trust Fund (other than such part as is required
to pay taxes and administration expenses) to be used for or diverted to any
purpose other than for the exclusive benefit of the Participants or their
Beneficiaries; (2) causes any reduction in the Accrued Benefit of any
Participant; or (3) causes or permits any portion of the Trust Fund to
revert to or become the property of the Employer or any Affiliated
Employer.
(e) Except as permitted by Regulations (including Regulation
1.411(d)-4), no Plan amendment or transaction having the effect of a Plan
amendment (such as a merger, plan transfer or similar transaction) shall be
effective if it eliminates or reduces any Section 411(d)(6) protected
benefits or adds or modifies conditions relating to Section 411(d)(6)
protected benefits the result of which is a further restriction on such
benefits unless
<PAGE>
such protected benefits are preserved with respect to benefits accrued as
of the later of the adoption date or effective date of the amendment. The
term "Section 411(d)(6) protected benefits" means the benefits described in
Code Section 411(d)(6)(A), early retirement benefits and retirement-type
subsidies described in Code Section 411(d)(6)(B)(i) and optional forms of
benefit described in Code Section 411(d)(6)(B)(ii).
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the
Plan by delivering to the Trustee and Administrator written notice of such
termination. Upon termination, the Accrued Benefit of each Participant
shall become fully Vested and shall not thereafter be subject to
Forfeiture.
(b) Upon the termination of the Plan, the Employer shall direct the
distribution of the Trust Fund to Participants in a manner which is
consistent with and satisfies the provisions of Section 6.5. Distributions
to a Participant shall be made in cash (or in property if permitted in the
Adoption Agreement) or through the purchase of an annuity from an insurance
company. Except as permitted by Regulations, the termination of the Plan
shall not result in the reduction of Section 411(d)(6) protected benefits
as described in Section 8.1.
8.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets, liabilities or
both may be transferred to any other plan only if the benefits which would be
received by a Participant under this Plan, in the event of a termination of the
Plan immediately after such transfer, merger or consolidation, are at least
equal to the benefits the Participant would have received if the Plan had
terminated immediately before the transfer, merger or consolidation. Any such
transfer, merger or consolidation must not otherwise result in the elimination
or reduction of any Section 411(d)(6) protected benefits as described in Section
8.1(e).
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS
(a) Any person may become the Employer hereunder by executing the
Adoption Agreement in form satisfactory to the Trustee, and it shall
provide such additional information as the Trustee may require. The consent
of the Trustee to act as such shall be signified by its execution of the
Adoption Agreement.
(b) Except as otherwise provided in this Plan, the affiliation of the
Employer with and the participation of its Employees in the Plan shall be
separate and apart from that of any other employer and its employees
hereunder.
9.2 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer
and any Employee or to be a consideration or an inducement for the employment of
any Employee. Nothing contained in this Plan shall be deemed to give any
Employee the right to be retained in the service of the Employer or to interfere
with the right of the Employer to discharge any Employee at any time regardless
of the effect which such discharge shall have upon him as a Participant under
this Plan.
9.3 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable to any person (including a Participant or his Beneficiary) shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the same shall
be void; and no such benefit shall in any manner be liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized except to such
extent as may be required by law.
(b) Section 9.3(a) shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan as a result of a loan made pursuant to
Section 7.5. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such portion of the amount to be
distributed as shall equal such indebtedness shall be paid to the Plan to
apply against or discharge such indebtedness. Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by the
Administrator that such indebtedness is to be so paid in whole or part from
such distribution. If the Participant or Beneficiary does not agree that
the indebtedness is a valid claim against his Vested Accrued Benefit, he
shall
<PAGE>
be entitled to a review of the validity of the claim in accordance with the
procedures set forth in Sections 2.12 and 2.13.
(c) Section 9.3(a) shall not apply to a Qualified Domestic Relations
Order and those other Domestic Relations Orders permitted to be so treated
by the Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to determine
the qualified status of Domestic Relations Orders and to administer
distributions under Qualified Domestic Relations Orders.
9.4 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act
and the laws of the State of Wisconsin, or where all or a portion of the assets
of such Plan and Trust are maintained by a Trustee not domiciled in Wisconsin,
the laws of the State of the domicile of the Trustee, other than any laws
respecting choice of law, to the extent not pre-exempted by the Act.
9.5 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.6 LEGAL ACTION
To the extent permitted by applicable law, in the event any claim, suit or
proceeding is brought regarding the Plan to which the Trustee or the
Administrator may be a party, they shall be entitled to be reimbursed from the
Trust Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan, by termination, by
power of revocation or amendment, by the happening of any contingency, by
collateral arrangement or by any other means, for any part of the Trust
Fund or any amounts contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of Participants or their
Beneficiaries.
(b) In the event the Employer shall make a contribution under a
mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the Employer
may demand repayment of such contribution at any time within one year
following the time of payment and the Trustee shall return such amount to
the Employer within the one year period. Earnings of the Plan attributable
to the contributions may not be returned to the Employer but any losses
attributable there to must reduce the amount so returned.
<PAGE>
(c) Notwithstanding anything herein to the contrary, if, pursuant to a
timely application (within the meaning of Act Section 403(c)(2)(B)) filed
by or on behalf of the Plan, the Commissioner of Internal Revenue Service
or his delegate should determine that the Plan does not initially qualify
as a tax-exempt plan under Code Section 401, and such determination is not
contested or, if contested, is finally upheld, then the Plan shall be void
ab initio and all amounts contributed to the Plan by the Employer, less
expenses paid, shall be returned within one year and the Plan shall
terminate, and the Trustee shall be discharged from all further
obligations.
(d) Except as specifically stated in the Plan, if any contribution by
the Employer to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code, then, to the extent any
deduction for such contribution is disallowed, the Employer may, within one
year following a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final decision of a court
of competent jurisdiction, demand repayment of such disallowed contribution
and the Trustee shall return such contribution within one year following
the disallowance. Earnings of the Plan attributable to the disallowed
contribution may not be returned to the Employer but any losses
attributable thereto must reduce the amount so returned.
9.8 BONDING
Every Fiduciary, except a bank or an insurance company, or any other person
handling Plan funds, unless exempted by the Act and regulations thereunder,
shall be bonded in an amount not less than ten percent of the amount of the
funds such Fiduciary or other person handles; provided, however, that the
minimum bond shall be $1,000 and the maximum bond shall be $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current Plan Year. The bond shall provide protection to the Plan against
any loss by reason of acts of fraud or dishonesty by the Fiduciary or such other
person alone or in connivance with others. The surety shall be a corporate
surety company (as such term is used in Act Section 412(a)(2)), and the bond
shall be in a form approved by the Secretary of Labor. The cost of such bonds
shall be an expense of the Trust Fund unless paid by the Employer.
9.9 EMPLOYER'S, ADMINISTRATOR'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, nor the Administrator, nor the Trustee, nor their
successors, shall be responsible for the validity of any annuity contract
purchased on behalf of a Participant or for the failure on the part of an
insurance company to make payments provided by any such annuity contract, or for
the action of any person which may delay payment or render an annuity contract
null and void or unenforceable in whole or in part.
<PAGE>
9.10 INSURANCE COMPANY PROTECTIVE CLAUSE
Any insurance company who shall issue an annuity contract shall not have
any responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. Any insurance company shall be protected and held harmless in
acting in accordance with any written direction of the Trustee, Employer or
Administrator and shall have no duty to see to the application of any funds paid
to the Trustee, nor be required to question any actions directed by the Trustee,
Employer or Administrator. Regardless of any provision of this Plan, an
insurance company shall not be required to take or permit any action or allow
any benefit or privilege contrary to the terms of any annuity contract which it
issues hereunder or of the rules of the insurance company.
9.11 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of this Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer.
9.12 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
In order to obtain reliance, the Employer, upon its initial execution of
the Adoption Agreement, or upon an amendment of any of its elective provisions,
may file an application with the Internal Revenue Service requesting a
determination letter that the Plan as adopted or amended by the Employer
qualifies as a tax-exempt plan under Code Section 401. The preceding sentence
may not apply where an application for a determination letter is not required
pursuant to current Revenue Procedures to obtain reliance. If, after initial
approval of this Plan by the Internal Revenue Service or, where an application
is not required to obtain reliance, after the Plan is established or amended,
the Employer at a later date fails to retain the Plan's qualified status, then
the Employer shall no longer be regarded as participating in a Prototype Plan
(as defined in Section 4.4(f)(9)) and the Plan for such Employer shall be
regarded as an individually designed plan.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.
<PAGE>
9.16 OWNER EMPLOYEES
(a) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the trade or business with respect to which
this Plan is established and one or more other trades or businesses, this Plan
and any plan or plans established for other trades or businesses must, when
looked at as a single plan, satisfy Code Sections 401(a) and 401(d).
(b) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan which
satisfies Code Sections 401(a) and 401(d) and which provides contributions and
benefits not less favorable than those provided for Owner-Employees under the
Plan.
(c) If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits provided for
the employees under the plan of the trade or business which are controlled must
be as favorable as those provided for him under the most favorable plan of the
trade or business which is not controlled.
(d) For the purpose of the preceding paragraphs, an Owner-Employee, or two
or more Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two or more Owner-Employees, together own the entire
interest in an unincorporated trade or business, or in the case of a
partnership, own more than fifty percent of either the capital interest or the
profits interest in the partnership. For the purpose of the preceding sentence,
an Owner-Employee, or two or more Owner-Employees, shall be treated as owning
any interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER
With the consent of the Employer and Trustee, any Affiliated Employer may
adopt this Plan and participate herein and be considered a Participating
Employer, by a properly executed document evidencing the adoption of the Plan by
such Participating Employer.
10.2 SINGLE TRUST FUND
Unless otherwise directed by the Employer, the Trustee shall be required to
commingle, hold and invest as a single Trust Fund all contributions made by
Participating Employers as well as all increments thereof.
10.3 DESIGNATION OF AGENT
With respect to all of its relations with the Trustee and Administrator for
the purpose of this Plan, each Participating Employer shall be deemed to have
irrevocably designated the Employer as its agent.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers. In the event of any such transfer the Employee involved shall not be
treated as having had a termination of employment.
10.5 PARTICIPATING EMPLOYER CONTRIBUTIONS AND FORFEITURES
Any Participating Employer contributions or Forfeitures subject to
allocation during any Plan Year shall be allocated among all Participants of all
Participating Employers in accordance with the provisions of this Plan. Any such
allocation shall be made without regard to which Participating Employer actually
made the contribution or without regard to the Participating Employer of any
Participant all or part of whose Accrued Benefit shall be forfeited.
10.6 PLAN EXPENSES
Any expenses of the Plan which are not paid by the Trust Fund shall be paid
by the Participating Employers in whatever proportion shall be determined by the
Employer.
10.7 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
10.8 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof shall be delivered to the Trustee. The Trustee
shall thereafter transfer, deliver and assign a portion of the Trust
<PAGE>
Fund equal in value to the Accounts of such Participants to itself (or to any
other person designated by such Participating Employer) as the Trustee of a
separate plan of the Participating Employer. Any discontinuance of participation
by a Participating Employer shall be effected in such a manner as to satisfy the
requirements of Section 8.3.
10.9 EMPLOYER'S AUTHORITY
The Employer shall have authority to make any and all necessary rules or
regulations, binding upon all Participating Employers and all Participants, to
effectuate the purpose of this Article.
ARTICLE XI
CASH OR DEFERRED PROVISIONS
Notwithstanding any provisions in the Plan to the contrary, the provisions
of this Article shall apply with respect to any 401(k) Profit Sharing Plan.
11.1 DETERMINATION OF EMPLOYER'S CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute to the Plan:
(1) The aggregate amount of Deferred Compensation resulting from
the deferral elections of Active Participants made pursuant to Section
11.3, which amount shall be deemed the Employer's Elective
Contribution.
(2) If elected in the Adoption Agreement, a Matching Contribution
or Qualified Matching Contribution, as specified in the Adoption
Agreement, to be made on an ongoing basis, year end basis or both,
also as specified in the Adoption Agreement.
(3) If elected in the Adoption Agreement, a Discretionary
Non-Elective Contribution.
(4) If elected in the Adoption Agreement, a Fixed Non-Elective
Contribution or Qualified Non-Elective Contribution, as specified in
the Adoption Agreement, to be made on either an ongoing or year end
basis, also as specified in the Adoption Agreement.
(b) Notwithstanding the foregoing, the Employer's contributions for
any Fiscal Year shall not exceed the maximum amount allowable as a
deduction to the Employer under the provisions of Code Section 404.
However, if this Plan is a Top Heavy Plan to which a minimum contribution
must be made, the Employer shall contribute the amount necessary to provide
such minimum contribution even if such amount exceeds current or
accumulated Net Profit or the amount which is deductible under Code Section
404.
(c) All contributions by the Employer shall be made in cash or in such
property as is acceptable to the Trustee.
11.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Except as otherwise provided in this Section 11.2, the Employer shall
generally pay to the Trustee its contributions to the Plan for each Plan Year
within the time prescribed by law, including extensions of time, for the filing
of the Employer's federal income tax return for the Fiscal Year. Elective
Contributions, however, shall be paid to the Trustee as of the earliest date on
which such contributions can reasonably be segregated from the Employer's
general assets, but in any event within ninety days from the date on which such
amounts would otherwise have been payable in cash to Active
<PAGE>
Participants. Notwithstanding the initial sentence of this Section 11.2,
Matching Contributions, Qualified Matching Contributions and Qualified
Non-Elective Contributions shall be paid to the Trustee not later than the last
day of the twelve-month period immediately following the close of the Plan Year
to which such contributions relate.
11.3 PARTICIPANT'S DEFERRAL ELECTION
(a) Each Active Participant may elect, subject to the limitations of
this Section 11.3 and the Adoption Agreement, to defer a part of the
Compensation he would have received for the Plan Year but for his deferral
election. In addition, if elected in the Adoption Agreement, each Active
Participant may elect to defer all or any portion of his Compensation that
is payable as a bonus. A deferral election (or modification of an earlier
election) may not be made with respect to Compensation which is currently
available on or before the date the Participant executed such election or,
if later, the later of the date the Employer adopts this Plan or the date
the Plan first becomes effective. Any elections or modifications thereof
made pursuant to this Section 11.3(a) shall become effective as soon as is
administratively feasible.
(b) An Active Participant's deferral election shall be valid until
modified or revoked by such Participant at such time or times as are
provided for in the Adoption Agreement. Such modification or revocation
shall be effective as soon as is administratively feasible. Except to the
extent the Employer otherwise elects in the Adoption Agreement, the
Employer may, in its sole discretion, allow an Active Participant to modify
or revoke his deferral election at any time during a Plan Year provided all
Active Participants similarly situated are treated in a similar manner.
(c) Notwithstanding the provisions of Section 11.3(b), an Active
Participant's deferral election shall be deemed amended upon notice to such
Active Participant from the Employer or Administrator that a reduction in
or revocation of his deferral election is required to prevent:
(1) an Active Participant's Deferred Compensation from exceeding
the limit set forth in Section 11.3(g);
(2) the Annual Additions (as defined in Section 4.4(f)(1)) from
exceeding the Maximum Permissible Amount (as defined in Section
4.4(f)(10)); or
(3) the sum of the Elective Contributions and, if applicable,
Qualified Matching Contributions and Qualified Non-Elective
Contributions from exceeding an amount which would cause the Plan to
violate the Actual Deferral Percentage test set forth in Section 11.5.
<PAGE>
(d) The amount by which an Active Participant's Compensation is
reduced pursuant to his deferral election shall be that Active
Participant's Deferred Compensation and shall be treated as an Elective
Contribution which is to be allocated to his Elective Account. The balance
in each Participant's Elective Account shall be fully Vested at all times
and shall not be subject to Forfeiture for any reason other than Section
6.9.
(e) Amounts held in a Participant's Elective Account may be
distributed as permitted under the Plan, but in no event prior to the
earliest to occur of the following:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age fifty-nine and one half;
(3) the proven financial hardship of a Participant, subject to
the limitations of Section 11.9;
(4) the termination of the Plan without (i) the existence at the
time of termination of another defined contribution plan (other than
an employee stock ownership plan as defined in Code Section 4975(e)(7)
or a simplified employee pension under Code Section 408(k)) or (ii)
the establishment of a successor defined contribution plan (other than
an employee stock ownership plan as defined in Code Section 4975(e)(7)
or a simplified employee pension under Code Section 408(k)) by the
Employer or an Affiliated Employer within the period ending twelve
months after distribution of all assets from the Plan as a result of
its termination;
(5) the date of the sale by the Employer to a person that is not
an Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) used by the Employer in a trade or
business of the Employer with respect to a Participant who continues
employment with the person acquiring such assets; or
(6) the date of the sale by the Employer of its interest in a
subsidiary (within the meaning of Code Section 409(d)(3)) to a person
that is not an Affiliated Employer with respect to a Participant who
continues employment with such subsidiary.
(f) In the event an Active Participant has received a hardship
distribution pursuant to Regulation 1.401(k)-1(d)(2)(iv) from any other
plan maintained by the Employer or Affiliated
<PAGE>
Employer or from his Elective Account pursuant to Section 11.9, then such
Active Participant shall not be permitted to elect to have Deferred Compensation
contributed to the Plan on his behalf for a period of twelve months following
the receipt of the distribution. Furthermore, the dollar limitation under Code
Section 402(g) shall be reduced, with respect to the Active Participant's
taxable year following the taxable year in which the hardship distribution is
made, by the amount of his Deferred Compensation for the taxable year in which
the hardship distribution was made.
(g) For any Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation under this Plan and any elective
deferrals (within the meaning of Code Section 402(g)) under all other
plans, contracts or arrangements of the Employer or an Affiliated Employer
or both shall not exceed the limitation imposed by Code Section 402(g), as
in effect for the calendar year in which a Participant's taxable year
begins. This dollar limitation shall be adjusted annually at the same time
and in the same manner as under Code Section 415(d).
(h) If a Participant has Excess Deferred Compensation for his taxable
year, such Participant may, not later than the April 15 following such
taxable year, notify the Administrator in writing as to what portion, if
any, of the Excess Deferred Compensation will be assigned to this Plan;
provided, however, that the amount of Excess Deferred Compensation assigned
to this Plan cannot exceed the Participant's Deferred Compensation. If,
however, a Participant has Excess Deferred Compensation for a taxable year,
taking into account only a Participant's Deferred Compensation and any
elective deferrals (within the meaning of Code Section 402(g)) under all
other plans, contracts or arrangements of the Employer or an Affiliated
Employer or both, then such Participant shall be required, not later than
March 15 following such taxable year, to notify the Administrator in
writing as to what portion, if any, of the Excess Deferred Compensation
will be assigned to this Plan, provided that the amount of Excess Deferred
Compensation assigned to the Plan cannot exceed the Participant's Deferred
Compensation. In either event, the Administrator shall direct the Trustee
to distribute the portion so assigned (and any Income allocable thereto) to
the Participant not later than the April 15 following the close of the
Participant's taxable year. Any distribution of less than the entire amount
of Excess Deferred Compensation assigned to this Plan and allocable Income
shall be treated as a pro rata distribution of Excess Deferred Compensation
and Income. Any distribution of Excess Deferred Compensation assigned to
this Plan (and any Income allocable thereto) on or before the last day of
the Participant's taxable year must satisfy all of the following
conditions:
(1) the Participant shall designate the distribution as one
attributable to Excess Deferred Compensation;
<PAGE>
(2) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation; and
(3) the Administrator must designate the distribution as a
distribution of Excess Deferred Compensation.
For the purpose of this Section 11.3, the term "Income" means the amount of
income or loss allocable to the Excess Deferred Compensation assigned to this
Plan for the taxable year of the Participant. The income or loss allocable to
the Participant's taxable year is determined by multiplying the income or loss
allocable to the Participant's Elective Account for such taxable year by a
fraction. The numerator is the Participant's Excess Deferred Compensation
assigned to this Plan for the taxable year of the Participant and the
denominator is the balance, as of the last day of the Participant's taxable
year, of the Participant's Elective Account, reduced by the gain allocable to
the Participant's Elective Account during such taxable year and increased by the
loss allocable to the Participant's Elective Account during such taxable year.
(i) Notwithstanding the provisions of Section 11.3(h), the amount of
Excess Deferred Compensation to be distributed under Section 11.3(h) shall
be reduced, but not below zero, by any distribution or recharacterization
of Excess Contributions pursuant to Section 11.6(a) for the Plan Year
beginning with or within the taxable year of the Participant.
(j) The Employer and the Administrator shall adopt whatever procedures
that are necessary to implement the deferral elections provided in this
Section 11.3.
11.4 ALLOCATION OF CONTRIBUTION AND FORFEITURES
(a) The Employer shall provide the Administrator with all the
information required by the Administrator to make a proper allocation of
the Employer's contributions for each Plan Year. Within a reasonable period
of time after the date of receipt by the Administrator of such information,
the Administrator shall allocate such contribution as follows:
(1) With respect to Elective Contributions made pursuant to
Section 11.1(a)(1), to each Active Participant's Elective Account in
an amount equal to the Deferred Compensation of such Active
Participant for the Plan Year. Elective contributions shall be
allocated as of the date of their receipt, but in event no later than
the Anniversary Date for the Plan Year to which such contributions
relate.
(2) With respect to any Matching Contributions or Qualified
Matching Contributions made pursuant to Section 11.1(a)(2), to each
Active Participant's Matching Account or Qualified Matching Account,
as the case may be, in an amount equal to the percentage, as
determined under the Adoption Agreement, of his Deferred Compensation.
In the case of Matching Contributions or Qualified Matching
<PAGE>
Contributions made on an ongoing basis, an Active Participant shall not be
required to complete a Year of Service or to be employed on the Anniversary Date
in order to be entitled to an allocation of Matching Contributions or Qualified
Matching Contributions. In the case of Matching Contributions or Qualified
Matching Contributions made on a year end basis, an Active Participant during
the Plan Year shall be entitled to an allocation of Matching Contributions or
Qualified Matching Contributions for that Plan Year in accordance with the
provisions of Section 11.4(a)(5). Contributions under this Section 11.4(a)(2)
shall be allocated as of the date of their receipt (but in no event later than
the Anniversary Date for the Plan Year to which such contributions relate) if
made on an ongoing basis or as of the Anniversary Date for the Plan Year, if
made on a year end basis. Notwithstanding the foregoing provisions of this
Section 11.4(a)(2) to the contrary, any Matching Contributions or Qualified
Matching Contributions that are allocated to a Participant's Matching Account or
Qualified Matching Account and that are made on account of Excess Deferrals
shall be forfeited. Any Matching Contributions or Qualified Matching
Contributions that are allocated to a Participant's Matching Account or
Qualified Matching Account and that are made on account of Excess Contributions
that are distributed pursuant to Section 11.6(a)(1) shall be forfeited. Finally,
any Matching Contributions or Qualified Matching Contributions that are
allocated to a Participant's Matching Account or Qualified Matching Account and
that are made on account of Excess Contributions that are recharacterized
pursuant to Section 11.6(a)(2) and that are ultimately distributed pursuant to
Section 11.8(a)(1) shall be forfeited. The forfeiture of Matching Contributions
or Qualified Matching Contributions made on account of Excess Contributions
shall be deemed to occur in the Plan Year following the Plan Year to which the
Excess Contributions relate and shall be treated in accordance with the election
made in the Adoption Agreement. The forfeiture of Matching Contributions or
Qualified Matching Contributions made on account of Excess Deferrals shall be
deemed to occur in the Plan Year following the Plan Year in which ends the
taxable year of the Active Participant to which the Excess Deferrals relate and
shall be treated in accordance with the election made in the Adoption Agreement.
(3) Any Discretionary Non-Elective Contributions made pursuant to
Section 11.1(a)(3) shall be allocated to each Active Participant's
Discretionary Non-Elective Account in accordance with the provisions
of Sections 4.3(a)(2) through (6) and the Adoption Agreement. An
Active Participant during the Plan Year shall share in the allocation
of Discretionary Non-Elective Contributions in accordance with the
provisions of Section 11.4(a)(5). Discretionary Non-Elective
Contributions shall be allocated as of the Anniversary Date for any
Plan Year.
<PAGE>
(4) With respect to any Fixed Non-Elective Contributions or
Qualified Non-Elective Contribution made pursuant to Section
11.1(a)(4), to each Active Participant's Fixed Non-Elective Account or
Qualified Non-Elective Account, as the case may be, in an amount equal
to the percentage of the Active Participant's Compensation specified
in the Adoption Agreement. In the case of Fixed Non-Elective
Contributions or Qualified Non-Elective Contributions made on an
ongoing basis, an Active Participant shall not be required to complete
a Year of Service or to be employed on the Anniversary Date in order
to be entitled to an allocation of Fixed Non-Elective Contributions or
Qualified Non-Elective Contributions. In the case of Fixed
Non-Elective Contributions or Qualified Non-Elective Contributions
made on a year end basis, an Active Participant during the Plan Year
shall be entitled to an allocation of Fixed Non-Elective Contributions
or Qualified Non-Elective Contributions for the Plan Year in
accordance with the provisions of Section 11.4(a)(5). Contributions
under this Section 11.4(a)(4) shall be allocated as of the date of
their receipt (but in no event later than the Anniversary Date for the
Plan Year to which such contributions relate) if made on an ongoing
basis or as of the Anniversary Date for the Plan Year, if made on a
year end basis.
(5) An Active Participant during the Plan Year who is an Employee
on the Anniversary Date shall be entitled to an allocation. An Active
Participant who is not an Employee on the Anniversary Date shall be
entitled to an allocation if such Active Participant completes a Year
of Service for purposes of benefit accrual.
(b) Any Forfeitures arising since the preceding Anniversary Date shall
first be used to restore the previously forfeited Accrued Benefit of any
Participant in accordance with Section 6.4(g) and shall then be used to
satisfy any contribution that may be required pursuant to Section 4.3(g) or
6.9 or both. The remaining Forfeitures, if any, shall be treated in
accordance with the Adoption Agreement. If, pursuant to the Adoption
Agreement, Forfeitures are used to reduce Matching Contributions, Qualified
Matching Contributions, Fixed Non-Elective Contributions or Qualified
Non-Elective Contributions and the contributions to which such Forfeitures
are applied are made on an ongoing basis only or, in the case of Matching
Contributions or Qualified Matching Contributions, are made on both ongoing
and year end bases, then such Forfeitures shall be used to reduce the
amount to be contributed by the Employer for the Plan Year following the
Plan Year in which the Forfeiture occurs. If, however, for the Plan Year
following the Plan Year in which the Forfeiture occurs, the Employer does
not make a Matching Contribution or Qualified Matching Contribution, then
any such Forfeitures used to reduce Matching Contributions or Qualified
Matching Contributions shall be allocated as of the Anniversary Date of
such following Plan Year to each Active Participant's Matching
<PAGE>
Account or Qualified Matching Account in the same proportion that his
Elective Contributions for such following Plan Year bear to the total Elective
Contributions of all Active Participants for such following Plan Year. In the
case of a Plan that provides for only Elective Contributions, any Forfeitures
not used as described in the first sentence of this Section 11.4(b) shall be
allocated to each Active Participant's Elective Account in the same proportion
that his Elective Contributions bear to the total Elective Contributions of all
Active Participants.
(c) Minimum contributions made pursuant to Section 4.3(d) shall be
allocated to a Participant's Qualified Non-Elective Account or, if the Plan
does not provide for Qualified Non-Elective Contributions, then minimum
contributions shall be allocated to a Qualified Non-Elective Account to be
established for each Participant.
11.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) For each Plan Year the Plan shall satisfy either of the following
tests:
(1) The Actual Deferral Percentage for those Active Participants
who are Highly Compensated Employees shall not be more than 1.25 times
the Actual Deferral Percentage of the Active Participants who are
Non-Highly Compensated Employees, or
(2) The excess of the Actual Deferral Percentage for the Active
Participants who are Highly Compensated Employees over the Actual
Deferral Percentage for Active Participants who are Non-Highly
Compensated Employees shall not be more than two percentage points.
Additionally, the Actual Deferral Percentage for the Active
Participants who are Highly Compensated Employees shall not be more
than two times the Actual Deferral Percentage for the Active
Participants who are Non-Highly Compensated Employees. The provisions
of Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are
incorporated herein by reference.
However, to prevent the multiple use of the alternative method set forth in
Section 11.5(a)(2) and Code Section 401(m)(9)(A), any Highly Compensated
Employee eligible to make a deferral election pursuant to Section 11.3 and to
make Employee contributions or to receive an allocation of Matching
Contributions under this Plan or under any other plan maintained by the Employer
or an Affiliated Employer shall have his Actual Contribution Ratio or Actual
Deferral Ratio, as specified in the Adoption Agreement, reduced pursuant to
Regulation 1.401(m)-2, the provisions of which are incorporated herein by
reference.
<PAGE>
(b) For purposes of this Section 11.5, the term "Actual Deferral
Percentage" means, with respect to the group of Active Participants who are
Highly Compensated Employees and the group of Active Participants who are
Non-Highly Compensated Employees for a Plan Year, the average of the Actual
Deferral Ratios, calculated separately for each Active Participant in each
group. An Active Participant's Actual Deferral Ratio is the amount of
Elective Contributions, Qualified Matching Contributions and Qualified
Non-Elective Contributions, which have not been taken into account for
purposes of calculating an Active Participant's Actual Contribution Ratio
under Section 12.7(c), allocated to each Active Participant's Elective
Account, Qualified Matching Account and Qualified Non-Elective Account for
such Plan Year, divided by the Active Participant's 414(s) Compensation for
such Plan Year. However, there shall not be taken into account for purposes
of calculating an Active Participant's Actual Deferral Ratio, any Qualified
Matching Contributions forfeited pursuant to Section 11.4(a)(2). For
purposes of determining the Actual Deferral Percentage of each group, there
shall be taken into account any Active Participant on whose behalf no
Elective Contributions are made for the Plan Year. The Actual Deferral
Ratio for each Active Participant and the Actual Deferral Percentage for
each group shall be calculated to the nearest one-hundredth of one percent
of the Active Participant's 414(s) Compensation. Elective Contributions
allocated to the Elective Account of each Active Participant who is a
Non-Highly Compensated Employee shall be reduced by any Excess Deferred
Compensation assigned to this Plan under Section 11.3(h) as a result of the
operation of Code Section 401(a)(30).
(c) For the purpose of determining the Actual Deferral Ratio of an
Active Participant who is a Highly Compensated Employee and who has Family
Members, the following shall apply:
(1) The combined Actual Deferral Ratio for the family group
(which shall be treated as one Highly Compensated Employee) shall be
the ratio determined by aggregating Elective Contributions, Qualified
Matching Contributions, Qualified Non-Elective Contributions and
414(s) Compensation of the Highly Compensated Employee and all Family
Members.
(2) The Elective Contributions, Qualified Matching Contributions,
Qualified Non-Elective Contributions and 414(s) Compensation of all
Family Members who are Non-Highly Compensated Employees shall be
disregarded for purposes of determining the Actual Deferral Percentage
of the group of Active Participants who are Non-Highly Compensated
Employees.
(3) If an Active Participant is required to be aggregated as a
member of more than one family group in the Plan, all Active
Participants who are members of those family groups that include the
Active Participant are treated as one family group.
<PAGE>
(d) For purposes of this Section 11.5, if this Plan and any other
plans of the Employer or any Affiliated Employer, which include cash
or deferred arrangements, are considered one plan for purposes of Code
Section 401(a)(4) or 410(b) (other than the average benefits test
under Code Section 410(b)(2)(a)(ii)), the cash or deferred
arrangements included in this Plan and such other plans shall be
treated as one cash or deferred arrangement. In addition, this Plan
and any other plan of the Employer or an Affiliated Employer which
include cash or deferred arrangements may be treated as a single cash
or deferred arrangement for purposes of this Section 12.5. In such a
case, the aggregated cash or deferred arrangements and this Plan and
the other plans including such arrangements must be treated as one
arrangement and one plan for purposes of Code Sections 401(a)(4),
401(k) and 410(b). Notwithstanding the above, contributions to an
employee stock ownership plan as defined in Code Section 4975(e)(7)
shall not be aggregated with this Plan, and this Section 11.5(d) shall
not apply unless this Plan and such other plans including cash or
deferred arrangements have the same Plan Year.
(e) For purposes of this Section 11.5, if a Highly Compensated
Employee is an Active Participant under this Plan and he also
participates in any other plans containing a cash or deferred
arrangements (other than a cash or deferred arrangement which is part
of an employee stock ownership plan as defined in Code Section
4975(e)(7)) of the Employer or an Affiliated Employer, all cash or
deferred arrangements under this Plan and such other plans shall be
treated as one cash or deferred arrangement for the purpose of
determining the Actual Deferral Ratio with respect to such Highly
Compensated Employee. However, if the cash or deferred arrangements
under this Plan and such other plans have different plan years, this
Section 11.5(e) shall be applied by treating all such cash or deferred
arrangements with plan years ending with or within the same calendar
year as a single cash or deferred arrangement.
11.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event the Plan does not satisfy one of the Actual Deferral
Percentage tests, the Administrator shall correct Excess Contributions pursuant
to any one of the options set forth below:
(a) On or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Employee who is the Active
Participant having the highest Actual Deferral Ratio shall have his portion
of Excess Contributions distributed to him and/or at his election
recharacterized as a voluntary Employee contribution pursuant to Section
4.6 until one of the Actual Deferral Percentage tests is satisfied, or
until his Actual Deferral Ratio equals the Actual Deferral Ratio of the
Highly Compensated Employee having the second highest Actual Deferral
Ratio. This process shall continue until one of such tests is satisfied.
For each Highly Compensated Employee, the
<PAGE>
amount of Excess Contributions is equal to the Elective Contributions,
Qualified Matching Contributions and Qualified Non-Elective Contributions
made on behalf of such Highly Compensated Employee (determined prior to the
application of this Section 11.6(a)) minus the amount determined by
multiplying the Highly Compensated Employee's Actual Deferral Ratio
(determined after application of this Section 11.6(a)) by his 414(s)
Compensation. However, in determining the amount of Excess Contributions to
be distributed and/or recharacterized with respect to a Highly Compensated
Employee as determined herein, such amount shall be reduced by any Excess
Deferred Compensation previously distributed to such Highly Compensated
Employee for his taxable year ending with or within such Plan Year. Any
distribution and/or recharacterization of Excess Contributions shall be
made in accordance with the following:
(1) With respect to the distribution of Excess Contributions,
such distribution:
(i) may be postponed but not later than the last day of the
Plan Year following the Plan Year in which Excess Contributions
are allocated;
(ii) shall be made first from Deferred Compensation with
respect to which Qualified Matching Contributions are not made
and, thereafter, simultaneously from Deferred Compensation with
respect to which Qualified Matching Contributions are made and
the Qualified Matching Contributions which relate to such
Deferred Compensation;
(iii) shall be made from Qualified Non-Elective
Contributions only to the extent that the amount of Excess
Contributions exceeds the sum of the Participant's Deferred
Compensation and Qualified Matching Contributions.
(iv) shall be adjusted for Income;
(v) shall be treated as a pro rata distribution of Excess
Contributions and Income if less than the entire amount of Excess
Contributions and Income is distributed; and
(vi) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess
Contributions, such recharacterized amounts:
(i) shall be deemed to have occurred on the date on which
the last of those Highly Compensated Employees with Excess
Contributions to be recharacterized is notified of the
recharacterization and the tax consequences of such
recharacterization;
<PAGE>
(ii) shall not exceed the amount of Deferred Compensation of
any Highly Compensated Employee for any Plan Year;
(iii) shall be treated as voluntary Employee contributions
for purposes of Code Section 401(a)(4) and Regulation
1.401(k)-1(b). However, for purposes of Code Sections 404, 411,
412, 415, 416 and 417, recharacterized Excess Contributions
continue to be treated as Deferred Compensation. Excess
Contributions recharacterized as voluntary Employee contributions
shall continue to be nonforfeitable and shall be subject to the
restrictions set forth in Section 11.3(e);
(iv) are not permitted if the Deferred Compensation
recharacterized plus voluntary Employee contributions actually
made by such Highly Compensated Employee exceed the maximum
amount of voluntary Employee contributions (determined prior to
application of Section 11.7) that such Highly Compensated
Employee is permitted to make under the Plan in the absence of
recharacterization;
(3) The determination and correction of Excess Contributions of
an Active Participant who is a Highly Compensated Employee and whose
Actual Deferral Ratio is determined under the provisions of Section
11.5(c)(1) shall be accomplished by reducing the Actual Deferral Ratio
as required herein and the Excess Contributions shall be allocated
among the Highly Compensated Employee and his Family Members in
proportion to the Elective Contributions, Qualified Matching
Contributions and Qualified Non-Elective Contributions allocated to
the Highly Compensated Employee and such Family Members.
(b) Within twelve months after the end of the Plan Year, the Employer
may make a special Qualified Non-Elective Contribution on behalf of Active
Participants who are Non-Highly Compensated Employees in an amount
sufficient to satisfy one of the Actual Deferral Percentage tests. Such
contribution shall be allocated to the Qualified Non-Elective Account of
each Active Participant who is a Non-Highly Compensated Employee in the
same proportion that each such Active Participant's 414(s) Compensation for
the Plan Year bears to the total 414(s) Compensation of all such Active
Participants.
(c) For purposes of this Section 11.6, Income means the income or loss
allocable to Excess Contributions for the Plan Year. The income or loss
allocable to Excess Contributions for the Plan Year is determined by
multiplying the income or loss for the Plan Year by a fraction. The
numerator is the Excess Contributions for the Plan Year. The denominator is
the sum of the Participant's Elective Account, Qualified Matching Account
and Qualified Non-Elective Account as of the end of the Plan Year, reduced
by the gain allocable to such Accounts for the Plan Year and increased by
the loss allocable to such Accounts for the Plan Year.
<PAGE>
(d) Any amounts not distributed within two and one-half months after
the end of the Plan Year shall be subject to the ten percent excise tax
imposed by Code Section 4979 on the Employer.
11.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) For each Plan Year the Plan shall satisfy either of the following
tests:
(1) The Actual Contribution Percentage for those Active
Participants who are Highly Compensated Employees shall not be more
than 1.25 times the Actual Contribution Percentage of the Active
Participants who are Non-Highly Compensated Employees, or
(2) The excess of the Actual Contribution Percentage for the
Active Participants who are Highly Compensated Employees over the
Actual Contribution Percentage for Active Participants who are
Non-Highly Compensated Employees shall not be more than two percentage
points. Additionally, the Actual Contribution Percentage for the
Active Participants who are Highly Compensated Employees shall not be
more than two times the Actual Contribution Percentage for the Active
Participants who are Non-Highly Compensated Employees. The provisions
of Code Section 401(m)(2) and Regulation 1.401(m)-1(b) are
incorporated herein by reference.
However, to prevent the multiple use of the alternative method described in
Section 11.7(a)(2) and Code Section 401(m)(9)(A), any Highly Compensated
Employee eligible to make a deferral election pursuant to Section 11.3 or under
any other cash or deferred arrangement maintained by the Employer or an
Affiliated Employer and to make Employee contributions or to receive an
allocation of Matching Contributions under this Plan shall have his Actual
Deferral Ratio or Actual Contribution Ratio, as specified in the Adoption
Agreement, reduced pursuant to Regulation 1.401(m)-2, the provisions of which
are incorporated herein by reference.
(b) For purposes of this Section 11.7, the term "Actual Contribution
Percentage" means, with respect to the group of Active Participants who are
Highly Compensated Employees and the group of Active Participants who are
Non-Highly Compensated Employees, the average of the Actual Contribution
Ratios calculated separately for each Active Participant in each group. An
Active Participant's Actual Contribution Ratio is the amount of Employer
Matching Contributions, voluntary Employee contributions made pursuant to
Section 4.6 and Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 11.6 on behalf of each such Active
Participant for such Plan Year divided by the Active Participant's 414(s)
Compensation for such Plan Year. However, there shall not be taken into
account for purposes of calculating an Active Participant's Actual
Contribution Ratio,
<PAGE>
any Matching Contributions forfeited pursuant to Section 11.4(a)(2). For
purposes of determining the Actual Contribution Percentage of each group,
there shall be taken into account any Active Participant to whose Matching
Account no Matching Contributions are allocated or who fails to make any
voluntary Employee contributions pursuant to Section 4.6. The Actual
Contribution Ratio for each Active Participant and the Actual Contribution
Percentage for each group shall be calculated to the nearest one-hundredth
of one percent of the Active Participant's 414(s) Compensation.
(c) For purposes of Section 11.7(b), only Matching Contributions
contributed to the Plan prior to the end of the succeeding Plan Year shall
be taken into account. Voluntary Employee contributions made pursuant to
Section 4.6 shall be taken into account for a Plan Year only if contributed
to the Plan during such Plan Year (or within thirty days thereafter).
Excess Contributions recharacterized as voluntary Employee contributions
shall be taken into account for the Plan Year in which they are includable
in the gross income of the Highly Compensated Employee. In addition, the
Administrator may elect to treat as Matching Contributions any Qualified
Non-Elective Contributions, which have not been taken into account for
purposes of calculating an Active Participant's Actual Deferral Ratio under
Section 11.5(b), and Elective Contributions made to this Plan or the
equivalent thereof made to any other plan maintained by the Employer or an
Affiliated Employer, subject to Regulation 1.401(m)-1(b)(2), which is
incorporated herein by reference. However, the Plan Year must be the same
as the plan year of any other plan of the Employer or Affiliated Employer
which is to be taken into account for purposes of this Section 11.7(c).
(d) For the purpose of determining the Actual Contribution Ratio of an
Active Participant who is a Highly Compensated Employee and who has Family
Members, the following shall apply:
(1) The combined Actual Contribution Ratio for the family group
(which shall be treated as one Highly Compensated Employee) shall be
the ratio determined by aggregating Matching Contributions, voluntary
Employee contributions made pursuant to Section 4.6, Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.6 and 414(s) Compensation of the Highly
Compensated Employees and all Family Members.
(2) The Matching Contributions, voluntary Employee contributions
made pursuant to Section 4.6, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.6 and 414(s)
Compensation of all Family Members who are Non-Highly Compensated
Employees shall be disregarded for purposes of determining the Actual
Contribution Percentage of the group of Active Participants who are
Non-Highly Compensated Employees.
<PAGE>
(3) If an Active Participant is required to be aggregated as a
member of more than one family group in the Plan, all Active
Participants who are members of those family groups that include the
Active Participant are treated as one family group.
(e) For purposes of this Section 11.7, if this Plan and any other
plans of the Employer or Affiliated Employer to which Matching
Contributions, voluntary Employee contributions, or both, are made are
treated as one plan for purposes of Code Section 401(a)(4) or 410(b) (other
than the average benefits test under Code Section 410(b)(2)(A)(ii), this
Plan and such other plans shall be treated as one plan for purposes of Code
Section 401(m). In addition, this Plan and any other plan of the Employer
or any Affiliated Employer to which Matching Contributions, voluntary
Employee contributions, or both, are made may be considered as a single
plan for purposes of determining whether or not such plans satisfy Code
Section 401(m). In such a case, the aggregated plans must satisfy Code
Sections 401(a)(4) and 410(b) as though such aggregated plans were a single
plan. Notwithstanding the above, contributions to an employee stock
ownership plan as defined in Code Section 4975(e)(7) shall not be
aggregated with this Plan and this Section 11.7(e) shall not apply unless
all such plans which are to be treated as a single plan have the same Plan
Year.
(f) For purposes of this Section 11.7, if a Highly Compensated
Employee is an Active Participant under this Plan and he also participates
in any other plans (other than an employee stock ownership plan as defined
in Code Section 4975(e)(7)) which are maintained by the Employer or an
Affiliated Employer and to which Matching Contributions, voluntary Employee
contributions, or both, are made, all such contributions on behalf of such
Highly Compensated Employee shall be aggregated for purposes of determining
such Highly Compensated Employee's Actual Contribution Ratio. However, if
this Plan and such other plans have different plan years, this Section
11.7(f) shall be applied by treating all plans with plan years ending with
or within the same calendar year as a single plan.
11.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event the Plan does not satisfy one of the Actual
Contribution Percentage tests, the Administrator (on or before the
fifteenth day of the third month following the end of the Plan Year, but in
no event later than the close of the following Plan Year) shall direct the
Trustee to distribute to the Highly Compensated Employee having the highest
Actual Contribution Ratio, his portion of Excess Aggregate Contributions
(and Income allocable to such contributions) or, if forfeitable, forfeit
the non-Vested portion of his Excess Aggregate Contributions attributable
to Matching Contributions (and Income allocable to such Forfeitures) until
either one of the tests set forth in Section 11.7(a) is satisfied, or until
his Actual Contribution Ratio equals the Actual Contribution Ratio of the
Highly Compensated Employee having the second
<PAGE>
highest Actual Contribution Ratio. This process shall continue until one of
the tests set forth in Section 11.7(a) is satisfied. The distribution
and/or Forfeiture of Excess Aggregate Contributions shall be made in the
following order:
(1) Voluntary Employee contributions including Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.6(a)(2);
(2) Matching Contributions.
(b) Any distribution of less than the entire amount of Excess
Aggregate Contributions (and allocable Income) shall be treated as a pro
rata distribution of Excess Aggregate Contributions and Income. Forfeitures
of Excess Aggregate Contributions (and allocable Income) shall be deemed to
occur in the Plan Year following the Plan Year to which they relate and
shall be treated in accordance with the election made in the Adoption
Agreement.
(c) Excess Aggregate Contributions attributable to amounts other than
voluntary Employee contributions, including forfeited Matching
Contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415.
(d) For each Highly Compensated Employee, the amount of Excess
Aggregate Contributions is equal to the Matching Contributions, voluntary
Employee contributions made pursuant to Section 4.6 and Excess
Contributions recharacterized as voluntary Employee contributions pursuant
to Section 11.6(a)(2) (determined prior to the application of Section
11.8(a)) minus the amount determined by multiplying the Highly Compensated
Employee's Actual Contribution Ratio (determined after application of
Section 11.8(a)) by his 414(s) Compensation. In no event shall the amount
of Excess Aggregate Contribution with respect to any Highly Compensated
Employee exceed the amount of Matching Contributions, voluntary Employee
contributions made pursuant to Section 4.6 and Excess Contributions
recharacterized as voluntary Employee contributions pursuant to Section
11.6(a)(2).
(e) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization under Section 11.6(a)(2).
(f) The determination and correction of Excess Aggregate Contributions
of a Highly Compensated Employee whose Actual Contribution Ratio is
determined under the family aggregation rules shall be accomplished by
reducing the Actual Contribution Ratio as required herein and the Excess
Aggregate Contributions shall be allocated among the Highly Compensated
Employee and his Family Members in proportion to the Matching
Contributions, voluntary Employee contributions made pursuant to Section
4.6 and Excess Contributions recharacterized as voluntary Employee
<PAGE>
contributions pursuant to Section 11.6 allocated to the Highly Compensated
Employee and such Family Members.
(g) Within twelve months after the end of the Plan Year, the Employer
may make a special Qualified Non-Elective Contribution on behalf of Active
Participants who are Non-Highly Compensated Employees in an amount
sufficient to satisfy one of the Actual Contribution Percentage tests. Such
contribution shall be allocated to the Qualified Non-Elective Account of
each Active Participant who is a Non-Highly Compensated Employee in the
same proportion that each such Active Participant's 414(s) Compensation for
the Plan Year bears to the total 414(s) Compensation of all such Active
Participants.
(h) For purposes of this Section 11.8, Income means the income or loss
allocable to Excess Aggregate Contributions for the Plan Year. The income
or loss allocable to Excess Aggregate Contributions for the Plan Year is
determined by multiplying the income or loss for the Plan Year by a
fraction. The numerator is the Excess Aggregate Contributions for the Plan
Year. The denominator is the sum of the Participant's Matching Account and
Voluntary Contribution Account (including any portion of his Elective
Account and Qualified Non-Elective Account attributable to Elective
Contributions and Qualified Non-Elective Contributions taken into account
under Section 11.7(c)) as of the end of the Plan Year reduced by the gain
allocable to such Accounts for the Plan Year and increased by the loss
allocable to such Accounts for the Plan Year.
The Income allocable to Excess Aggregate Contributions resulting from
recharacterization of Elective Contributions shall be determined and distributed
as if such recharacterized Elective Contributions had been distributed as Excess
Contributions.
(i) Any amounts not distributed within two and one-half months after
the end of the Plan Year shall be subject to the ten percent excise tax
imposed by Code Section 4979 on the Employer.
11.9 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) If and to the extent elected by the Employer in the Adoption
Agreement, at the request of the Participant, the Employer shall direct the
Trustee to distribute to any Participant an amount up to the lesser of 100%
of his Vested Accrued Benefit as determined as of the preceding Valuation
Date or the amount necessary to satisfy the immediate and heavy financial
need of the Participant. The Employer, on the basis of all relevant facts
and circumstances, shall determine whether a Participant has an immediate
and heavy financial need. In the case of a distribution from a
Participant's Elective Account, an immediate and heavy financial need can
only result if it is made on account of:
<PAGE>
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for such
individuals to obtain medical care;
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Payment of tuition, related educational fees, and room and
board expenses for the next twelve months of post-secondary education
for the Participant, his spouse, children, or dependents; or
(4) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) A distribution from an Account other than a Participant's Elective
Account shall be made on account of any of the circumstances listed above
or any other like circumstance which the Employer determines results in an
immediate and heavy financial need.
(c) No distribution from a Participant's Elective Account shall be
made pursuant to this Section 11.9 unless the Employer, based upon the
Participant's representation and such other facts as are known to the
Employer, determines that all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under this Plan and all other plans maintained by the Employer or an
Affiliated Employer;
(3) The Plan and all other plans maintained by the Employer and
any Affiliated Employer provide that the Elective Contributions and
voluntary Employee contributions made by the Participant will be
suspended for at least twelve months after receipt of the hardship
distribution; and
(4) The Plan and all other plans maintained by the Employer, and
any Affiliated Employer provide that the Participant's Deferred
Compensation for the Participant's taxable year immediately following
the taxable year of the hardship distribution will not exceed the
applicable limit under Code Section 402(g) for such next taxable year
less the amount of such Participant's Deferred Compensation for the
taxable year in which the hardship distribution occurs.
<PAGE>
(d) Notwithstanding the above, distributions from a Participant's
Elective Account shall be limited solely to the Participant's Deferred
Compensation and any income attributable thereto credited to the
Participant's Elective Account as of December 31, 1988. Distributions from
a Participant's Qualified Matching Account and Qualified Non-Elective
Account shall not be permitted.
(e) Any distribution made pursuant to this Section 11.9 shall be made
in a manner which is consistent with and satisfies the provisions of
Section 6.5.
(f) The Employer may direct the Administrator to charge the
Participant or his Account for the fees assessed by the Administrator to
process a distribution under this Section 11.9.
<PAGE>
ADOPTION AGREEMENT FOR
THE AAL MUTUAL FUNDS PROTOTYPE
STANDARDIZED PROFIT SHARING
PLAN AND TRUST
(WITH PAIRING PROVISIONS)
The undersigned Employer adopts The AAL Mutual Funds Standardized
Profit Sharing Plan for those Employees who shall qualify as Participants
hereunder, to be known as the
A1
(Enter Plan Name)
The Plan shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:
CAUTION: The failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.
EMPLOYER INFORMATION
B1 NAME OF EMPLOYER
B2 ADDRESS
City State Zip
B3 NAME(S) OF TRUSTEE(S)
NOTE: The Trustee has all investment decision making responsibility unless
the Trustee is Emjay Corporation, in which case the Employer has all
investment decision making responsibility.
B4 ADDRESS OF TRUSTEE(S) a. ( ) Use Employer Address.
b. ( )
Street
City State Zip
B5 EMPLOYER FISCAL YEAR means the 12 consecutive month period commencing on
----------------- (e.g., January 1) and ending on ------------------
month day month day
Copyright 1995 AAL Capital Management Corporation
1
<PAGE>
PLAN INFORMATION
C1 EFFECTIVE DATE
This Adoption Agreement for The AAL Mutual Funds Standardized Profit
Sharing Plan and Trust shall:
a. ( ) establish a new Plan effective as of -----------------
(hereinafter called the "Effective Date").
b. ( ) constitute an amendment and restatement in its entirety of a
previously established qualified Plan of the Employer which was
effective ------------------ (hereinafter called the "Effective
Date"). Except as specifically provided in the Plan, the effective
date of this amendment and restatement is ----------------.
C2 PLAN YEAR means the 12 consecutive month period commencing on
--------------- (e.g., January 1) and ending on ----------------.
month day month day
IS THERE A SHORT PLAN YEAR?
a. ( ) No.
b. ( ) Yes, beginning -------------------
month day year
and ending ------------------
month day year
C3 ANNIVERSARY DATE of Plan (Annual Valuation Date).
-------------------
month day
C4 NAME OF PLAN ADMINISTRATOR. ( Document provides for the Employer to appoint
an Administrator. If none is named, the Employer will become the
Administrator.)
a. ( ) Employer (Use Employer Address).
b. ( ) Name
Address
City State Zip
2
<PAGE>
ELIGIBILITY, VESTING AND RETIREMENT AGE
D1 ELIGIBLE EMPLOYEES (Plan Section 1.24) shall mean:
a. ( ) all Employees.
b. ( ) all Employees except those checked below:
1. ( ) Employees whose employment is governed by a collective
bargaining agreement between the Employer and "employee
representatives" under which retirement benefits are the subject
of good faith bargaining.
2. ( ) Employees who are non-resident aliens and who receive no
earned income (within the meaning of Code Section 911(d)(2)) from
the Employer which constitutes income from sources within the
United States (within the meaning of Code Section 861(a)(3)).
NOTE: The term "Employee" includes any individual employed by an Affiliated
Employer or a Leased Employee.
D2 HOURS OF SERVICE (Plan Section 1.42) will be determined on the basis of the
method selected below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.
a. ( ) On the basis of actual hours for which an Employee is paid or
entitled to payment.
b. ( ) On the basis of days worked. An Employee will be credited with 10
Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the day.
c. ( ) On the basis of weeks worked. An Employee will be credited with 45
Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the week.
d. ( ) On the basis of semi-monthly payroll periods. An Employee will be
credited with 95 Hours of Service if under the Plan such Employee
would be credited with at least 1 Hour of Service during the
semi-monthly payroll period.
e. ( ) On the basis of months worked. An Employee will be credited with
190 Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the month.
D3 YEAR OF SERVICE (Plan Section 1.82) and 1-YEAR BREAK IN SERVICE (Plan
Section 1.55) will be determined as follows:
ELIGIBILITY. If the Plan provides for a service requirement of 1 Year or 2 Years
of Service the eligibility computation periods following the initial eligibility
computation period shall be based on (check either a. or b.):
a. ( ) Anniversary of the initial eligibility computation period.
b. ( ) Plan Year.
3
<PAGE>
To complete a Year of Service for purposes of Eligibility, the following number
of Hours of Service must be completed during the eligibility computation period
(check one):
c. ( ) 1000.
d. ( ) 750.
e. ( ) Other ----------------- (Cannot specify more than 1000).
VESTING. To determine the Vested percentage of a Participant's Accrued Benefit,
the vesting computation period shall be based on (check either f. or g.):
f. ( ) Plan Year.
g. ( ) 12-month period beginning.
To complete a Year of Service for purposes of Vesting, the following number of
Hours of Service must be completed during the vesting computation period (check
one):
h. ( ) 1000.
i. ( ) 750.
j. ( ) Other ---------------- (Cannot specify more than 1000).
BENEFIT ACCRUAL. To be entitled to an allocation of the Employer's contribution,
the accrual computation period shall be based on (check either k. or l.):
k. ( ) Plan Year.
l. ( ) 12-month period beginning .
To complete a Year of Service for purposes of Benefit Accrual, the following
number of Hours of Service must be completed during the accrual computation
period (check one):
m. ( ) 501.
n. ( ) Other ----------------- (Cannot specify more than 501).
1-YEAR BREAK IN SERVICE. The number of Hours of Service required to avoid a
1-Year Break in Service shall be (checked either o. or p.):
o. ( ) 501 Hours of Service.
p. ( ) Other ---------------- (Cannot specify more than 501).
4
<PAGE>
D4 CONDITIONS OF ELIGIBILITY (Plan Section 3.1). Any Eligible Employee may
become an Active Participant under the Plan if such Eligible Employee has
satisfied the age and service requirements, if any, specified below (Check
either a. OR b. and c., and if applicable, d.):
a. ( ) NO AGE OR SERVICE REQUIRED.
b. ( ) SERVICE REQUIREMENT. (May not exceed 2 Years of Service. If more
than 1 Year of Service is required, 100% immediate vesting is
mandatory.)
1. ( ) N/A - No service requirement.
2. ( ) 1/2 Year of Service.
3. ( ) 1 Year of Service.
4. ( ) 11/2Years of Service.
5. ( ) 2 Years of Service.
6. ( ) Other .
NOTE: If the service requirement selected is other than a whole number of
Years of Service, an Employee will not be required to complete any
specified number of Hours of Service to satisfy such service
requirement.
c. ( ) AGE REQUIREMENT (may not exceed 21).
1. ( ) N/A - No age requirement.
2. ( ) 20 1/2 .
3. ( ) 21.
4. ( ) Other ------------- .
d. ( ) FOR NEW PLANS ONLY - The age and/or service requirements above are
waived as specified below in the case of any Eligible Employee who is
employed on (check whichever is applicable):
1. ( ) Age requirement only.
2. ( ) Service requirement only.
3. ( ) Both age and service requirements.
D5 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.1) An Eligible Employee
shall become an Active Participant as of:
a. ( ) The first day of the Plan Year in which he meets the requirements
in D4 above.
b. ( ) The first day of the Plan Year in which he meets the requirements
in D4 above, if he meets such requirements in the first 6 months of
the Plan Year, or as of the first day of the next succeeding Plan Year
if he meets such requirements in the last 6 months of the Plan Year.
c. ( ) The earlier of the first day of the seventh month or the first day
of the Plan Year coinciding with or next following the date on which
he meets the requirements in D4 above.
5
<PAGE>
d. ( ) The first day of the Plan Year next following the date on which he
meets the requirements in D4 above. (Service requirement must be 1/2
Year of Service or less or 1 1/2Years of Service or less if 100%
immediate vesting is selected, and age requirement must be 201/2or
less.)
e. ( ) The first day of the month coinciding with or next following the
date on which he meets the requirements in D4 above.
f. ( ) The first day of the Plan Year quarter coinciding with or next
following the date on which he meets the requirements in D4 above.
g. ( ) Other ----------------------------------------------- , provided
that an Eligible Employee who has satisfied the maximum age and
service requirements that are permissible in D4 above, shall become an
Active Participant no later than the earlier of (1) 6 months after
such requirements are satisfied, or (2) the first day of the first
Plan Year after such requirements are satisfied, unless the Employee
separates from service before such date.
D6 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4 (b)). The vesting
schedule, based on number of Years of Service, shall be as follows:
a. ( ) 100% upon entering Plan. (Required if service requirement in D4 is
greater than 1 Year of Service.)
b. ( ) 0-2 years 0% c. ( ) 0-4 years 0%
3 years 100% 5 years 100%
d. ( ) 0-1 year 0% e. ( ) 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80%
6 years 100%
f. ( ) 1 year 20% g. ( ) 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%
h. ( ) Other. Must be at least as liberal as either c. or g. above.
Years of Service Percentage
6
<PAGE>
D7 FOR AMENDED PLANS (Plan Section 6.4 (f)). If the vesting schedule has been
amended to a less favorable schedule, enter the pre-amended schedule below:
a. ( ) N/A - Vesting schedule has not been amended or amended schedule is
more favorable in all years.
b. ( ) Years of Service Percentage
D8 TOP HEAVY VESTING (Plan Section 6.4 (c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule shall apply and shall be treated as a
Plan amendment pursuant to this Plan. Once effective, this schedule shall
continue to apply whether or not the Plan is a Top Heavy Plan.
a. ( ) N/A (D6a., b., d., e. or f. was selected).
b. ( ) 0-1 year 0% c. ( ) 0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
d. ( ) Other. Must be at least as liberal as either b. or c. above.
Years of Service Percentage
NOTE: This section does not apply to the Employer Contribution Account of
any Participant who does not have an Hour of Service after the Plan
becomes a Top Heavy Plan. The Vested percentage of the Employer
Contribution Account of such a Participant will be determined without
regard to this Section D8.
7
<PAGE>
D9 VESTING (Plan Section 6.4 (h)). In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:
a. ( ) Service prior to the Effective Date of the Plan or a predecessor
plan.
b. ( ) N/A.
c. ( ) Service prior to the vesting computation period in which an
Employee attains age eighteen.
d. ( ) N/A.
D10 PLAN SHALL RECOGNIZE SERVICE WITH ANOTHER EMPLOYER (Plan Section 1.82).
a. ( ) No.
b. ( ) Yes. Service with ------------------------ shall be recognized for
the following purposes under the Plan:
1. ( ) Eligibility.
2. ( ) Vesting.
3. ( ) Both eligibility and vesting.
D11 NORMAL RETIREMENT AGE (Plan Section 1.53) means (check one):
a. ( ) the date on which a Participant attains age ---- (not to exceed
65).
b. ( ) the later of the date a Participant attains age ---- (not to
exceed 65) or the first day of the Plan Year in which occurs the (not
to exceed fifth) anniversary of the date he became an Active
Participant.
c. ( ) Other ------------------------------------- , but in no event
later than the date a Participant attains age 65 or, if later, the
first day of the Plan Year in which occurs the fifth anniversary of
the date he became an Active Participant.
D12 EARLY RETIREMENT (Plan Section 1.21) means a Participant's termination of
employment occurring on or after (check one):
a. ( ) the date on which a Participant attains age ---- .
b. ( ) date on which a Participant attains age ---- and has completed at
least Years of Service for vesting purposes.
c. ( ) the later of the date on which a Participant attains age ---- or
the anniversary of the date on which he first became an Active
Participant.
d. ( ) the later of the date on which a Participant attains age ---- or
the ---- anniversary of the date on which he was first credited with
an Hour of --------- Service.
e. ( )
f. ( ) N/A - No Early Retirement provision provided.
8
<PAGE>
CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
E1 a. COMPENSATION (Plan Section 1.15) shall be based on (check one):
1. ( ) the 12-month period designated in Section D3 for the purpose
of determining a Year of Service for benefit accrual.
2. ( ) the Fiscal Year ending during the Plan Year.
3. ( ) the calendar year ending during the Plan Year.
b. For the Plan Year in which an Eligible Employee becomes an Active
Participant pursuant to Section 3.1(a) of the Plan, Compensation shall
be recognized from. . .
1. ( ) the first day of the period selected in a. above.
2. ( ) the date the Eligible Employee becomes an Active Participant.
c. Shall amounts which are not currently includible in the Participant's
gross income by reason of the application of Code Sections 125,
402(e)(3), 402(h)(1)(B) and 403(b) be treated as Compensation?
1. ( ) Yes.
2. ( ) No.
E2 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION (Plan Section 4.1).
a. ( ) Discretionary, out of current or accumulated Net Profits, to be
determined by the Employer.
b. ( ) Discretionary, not limited to Net Profits, to be determined by the
Employer.
NOTE: If E2b. is selected the excess contribution percentage cannot exceed
the Maximum Excess Percentage under Plan Section 1.52. Section E2b.
cannot be selected if the annual overall permitted disparity limit
under Plan Section 4.9(a) applies.
E3 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES (Plan Section 4.3).
The Employer's contributions and Forfeitures, if any, shall be allocated as
follows (check either a. or b.):
a. ( ) On a non-integrated basis.
b. ( ) On an integrated basis.
If b. is selected the integration level will be (check one). . .
c. ( ) $ --------- .
d. ( ) ---- % of the Taxable Wage Base in effect at the beginning of the
12-month period designated in Section D3 for the purpose of
determining a Year of Service for benefit accrual.
e. ( ) Twenty percent of the Taxable Wage Base in effect at the beginning
of the 12-month period designated in Section D3 for the purpose of
determining a Year of Service for benefit accrual.
9
<PAGE>
and the Maximum Excess Percentage will be (check either f. or g.). . .
f. ( ) The percentage determined under the Plan.
g. ( ) ----- %.
Shall the allocation of the Employer's contributions and Forfeitures, if
any, be done on the assumption that the Plan is a Top Heavy Plan (check
either h. or i.)?
h. ( ) Yes.
i. ( ) No.
E4 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
a. If any Active Participant is covered under one or more defined
contribution plans maintained by the Employer or any Affiliated
Employer, all of which are Prototype Plans, or under a welfare benefit
fund, as defined in code Section 419(e), or an individual medical
account, as defined in code Section 415(1)(2), then the Excess Amount
attributed to this Plan shall equal. . .
1. ( ) N/A.
2. ( ) The product of:
(i) The total Excess Amount allocated as of such date (including
any amount which would have been allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as
of such date under this Plan divided by (B) the total amount
allocated as of such date under this Plan and all such other
defined contribution plans (determined without regard to the
limitations of Code Section 415).
3. ( ) The total Excess Amount.
4. ( ) No part of the Excess Amount.
NOTE: If the Employer adopts Paired Plan #002, Paired Plan #003 or both such
Paired Plans, the Employer must coordinate its elections under each
Adoption Agreement.
b. If any Active Participant is covered under one or more qualified
defined contribution plans maintained by the Employer or an Affiliated
Employer which are not Prototype Plans, then. . .
1. ( ) N/A.
2. ( ) The provisions of Section 4.4(b) of the Plan will apply as if
the other plan or plans were Prototype Plans.
10
<PAGE>
3. ( ) Provide the method under which this Plan and such other
defined contribution plans will limit total Annual Additions to
the Maximum Permissible Amount, and will properly reduce any
Excess Amount in a manner that precludes Employer discretion.
c. If any Participant is or ever has been a participant in a defined
benefit plan maintained by the Employer or any Affiliated Employer,
then. . .
1. ( ) N/A.
2. ( ) In any Limitation Year, the Annual Additions credited to the
Participant under this Plan may not cause the sum of the Defined
Benefit Fraction and the Defined Contribution Fraction to exceed
1.0. If the Employer's contribution that would otherwise be made
on the Participant's behalf during the Limitation Year would
cause the 1.0 limitation to be exceeded, the rate of contribution
under this Plan will be reduced so that the sum of the fractions
equals 1.0. If the 1.0 limitation is exceeded because of an
Excess Amount, such Excess Amount will be reduced in accordance
with Section 4.4(a)(4) of the Plan.
3. ( ) In any Limitation Year, the Projected Annual Benefit of a
Participant under a defined benefit plan may not cause the sum of
the Defined Benefit Fraction and the Defined Contribution
Fraction to exceed 1.0. If the Projected Annual Benefit of a
Participant during the Limitation Year would cause the 1.0
limitation to be exceeded, then the Projected Annual Benefit
shall be reduced so that the sum of the fractions does not exceed
1.0.
4. ( ) Provide the method under which this Plan and any defined
benefit plan will satisfy the 1.0 limitation in a manner that
precludes Employer discretion.
E5 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h)). Distributions upon the
death of a Participant prior to receiving any benefits shall (check one). .
a. ( ) be made pursuant to the election of the Beneficiary.
b. ( ) begin within one year of death for a designated Beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such Beneficiary, except that if the Beneficiary is the
Participant's spouse, within the time the Participant would have
attained age 70 1/2.
c. ( ) be made within 5 years of death for all Beneficiaries.
d. ( ) other
11
<PAGE>
E6 LIFE EXPECTANCIES (Plan Sections 6.5(d) and 6.6(h)) for minimum
distributions required pursuant to Code Section 401(a)(9) shall (check
one). . .
a. ( ) be recalculated at the election of the Participant or his spouse,
as the case may be.
b. ( ) be recalculated.
c. ( ) not be recalculated.
E7 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION (Plan Section 6.5(c)(1)).
Distributions upon termination of employment pursuant to Section 6.4(a) of
the Plan shall not be made unless the following conditions have been
satisfied (check one):
a. ( ) N/A. Immediate distributions may be made at the Participant's
election.
b. ( ) The Participant has incurred ----- 1-Year Break(s) in Service.
c. ( ) The Participant has satisfied the conditions for Early Retirement,
has attained Normal Retirement Age or has become Totally and
Permanently Disabled.
d. ( ) The Participant's Vested Accrued Benefit under the Plan is less
than $ ------ . If the Participant's Vested Accrued Benefit exceeds
such amount, then no distribution shall be made until the Participant
has satisfied the conditions for Early Retirement, has attained Normal
Retirement Age or has become Totally and Permanently Disabled.
e. ( ) Other ----------------------------------------
NOTE: Regardless of the above, for a Participant whose Vested Accrued
Benefit is $3,500 or less, the Plan provides for immediate payment of
his Vested Accrued Benefit.
E8 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6). Distributions under the
Plan may be made. . .
a. 1. ( ) in lump sums.
2. ( ) in lump sums or installments.
b. AND, pursuant to Plan Secton 6.13,
1. ( ) no annuities are allowed (avoids Joint and Survivor Annuity
rules).
2. ( ) annuities are allowed (Plan Section 6.13 shall not apply).
NOTE: b.1. above may not be elected if this is an amendment to a plan which
permitted annuities as a form of distributions.
c. AND may be made in. . .
1. ( ) cash only (except for annuity contracts).
2. ( ) cash or property.
12
<PAGE>
TOP HEAVY REQUIREMENTS
F1 TOP HEAVY DUPLICATIONS/DEFINED BENEFIT PLAN (Plan Section 4.3(d)). When a
Non-Key Employee is an Active Participant in this Plan and a participant in
a defined benefit plan maintained by the Employer or an Affiliated
Employer, indicate which method shall be utilized to avoid duplication of
top heavy minimum benefits and contributions (check one).
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; this Plan and the defined benefit plan will both provide top
heavy minimum contributions and benefits.
c. ( ) A minimum, non-integrated contribution of 5% of each Non-Key
Employee's 415 Compensation shall be provided in this Plan.
d. ( ) A top heavy minimum benefit shall be provided under the defined
benefit plan.
e. ( ) Specify the method under which this Plan and such other defined
benefit plan will provide top heavy minimum benefits or contributions
for Non-Key Employees that will preclude Employer discretion.
F2 ENHANCED MINIMUMS (Plan Section 4.4(e)). When the Employer, an Affiliated
Employer or both maintained a defined benefit plan, indicate whether this
Plan or the defined benefit plan will provide an e - nhanced top heavy
minimum benefit or contribution in order to preserve the use of 1.25 in the
computation of the denominator of the Defined Benefit Fraction and Defined
Contribution Fraction (check one):
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; an enhanced top heavy minimum benefit or contribution will
not be provided.
c. ( ) The enhanced top heavy minimum contribution will be provided in
this Plan.
d. ( ) The enhanced top heavy minimum benefit will be provided in the
defined benefit plan.
F3 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2). Where the Employer or
an Affiliated Employer maintains a defined benefit plan in addition to this
Plan, the present value of accrued benefits under the defined benefit plan
shall be determined on the basis of the following assumptions:
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) Preretirement Interest Rate
Postretirement Interest Rate -----------
Preretirement Mortality -----------
Postretirement Mortality ------------
F4 TOP HEAVY DUPLICATIONS/DEFINED CONTRIBUTION PLAN (Plan Section 4.3(d)).
13
<PAGE>
When a Non-Key Employee is an Active Participant in this Plan and is a
participant in another defined contribution plan (other than a Paired Plan)
maintained by the Employer or an Affiliated Employer, indicate which method
shall be utilized to avoid duplication of top heavy minimum contributions.
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains
another defined contribution plan (other than a Paired Plan).
b. ( ) N/A; this Plan and such other defined contribution plan will both
provide top heavy minimum contributions.
c. ( ) The top heavy minimum contribution shall be provided in this Plan.
d. ( ) The top heavy minimum contribution shall be provided in such other
defined contribution plan.
e. ( ) Specify the method under which the Plan and such other defined
contribution plan will provide top heavy minimum contributions for
Non-Key Employees that will preclude Employer discretions.
F5 TOP HEAVY MINIMUM CONTRIBUTIONS (Plan Section 4.3(d)) shall be provided
(check either a. or b.). . .
a. ( ) only to Non-Key Employees.
b. ( ) without regard to whether an Active Participant is a Non-Key
Employee.
MISCELLANEOUS
G1 LOANS TO PARTICIPANTS (Plan Section 7.5).
a. ( ) Yes, loans may be made.
b. ( ) Yes, loans may be made but only in the event of a financial
hardship.
c. ( ) No, loans may not be made.
If YES, must the loan be for a minimum amount (check either d. or e.)?
d. ( ) Yes. The minimum loan amount must be $ ------- (insert dollar
amount not greater than $1000).
e. ( ) No.
If loans are permitted, can a Participant have more than one loan
outstanding at the same time (check either f. or g.)?
f. ( ) Yes.
g. ( ) No.
G2 PARTICIPANT INVESTMENT OF ACCOUNTS (Plan Section 7.4).
a. ( ) No, Participants are not permitted to direct the investment of their
Accounts.
b. ( ) Yes, Participants are permitted to direct the investment of their
Accounts, but only if they have attained age ----. (Indicate age or N/A, if
attainment of a
14
<PAGE>
certain age is not required.)
If YES, Participant direction extends to all Accounts except for the
Accounts checked below:
c. ( ) Employer Contribution Account.
d. ( ) Rollover Account.
e. ( ) Voluntary Contribution Account.
f. ( ) Qualified Voluntary Employee Contribution Account.
g. ( ) Mandatory Contribution Account.
NOTE: INVESTMENT OF THE TRUST FUND IS RESTRICTED TO AAL MUTUAL FUNDS OR SUCH
OTHER INVESTMENTS PERMITTED BY AAL CAPITAL MANAGEMENT CORPORATION
(PLAN SECTION 7.2).
G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.5).
a. ( ) Yes, transfers from qualified plans (and rollovers) will be
allowed.
b. ( ) No, transfers from qualified plans (and rollovers) will not be
allowed.
If YES, withdrawals from a Participant's Rollover Account shall. . .
c. ( ) be permitted.
d. ( ) not be permitted.
G4 HARDSHIP DISTRIBUTIONS (Plan Section 6.11).
a. ( ) Yes, hardship distributions are permitted.
b. ( ) No, hardship distributions are not permitted.
G5 IN-SERVICE DISTRIBUTIONS (Plan Section 6.10).
a. ( ) Yes, in-service distributions are permitted.
b. ( ) Yes, in-service distributions are permitted, but only if the
Participant has attained age ---- .
c. ( ) Yes, in-service distributions are permitted, but only upon the
occurrence of the following circumstance(s)
------------------------------- .
d. ( ) No, in-service distributions are not permitted.
15
<PAGE>
An Employer who has ever maintained or who later adopts any plan in addition to
this Plan (including a welfare benefit fund, as defined in Code Section 419(e),
which provides post-retirement medical benefits allocated to separate accounts
for Key Employees, as defined in Code Section 419A(d)(3), or an individual
medical account, as defined in Code Section 415(1)(2)) (other than Paired Plans)
may not rely on the opinion letter issued by the National Office of the Internal
Revenue Service as evidence that this Plan is qualified under Code Section 401.
If the Employer who adopts or maintains multiple plans wishes to obtain reliance
that this Plan is qualified, application for a determination letter should be
made to the appropriate Key District Office.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under Code
Section 401 unless the terms of the Plan, as herein adopted or amended, that
pertain to the requirements of Code Sections 401(a)(4), 401(a)(17), 401(1),
401(a)(5), 410(b) and 414(s), as amended by the Tax Reform Act of 1986 or later
laws, (a) are made effective retroactively to the first day of the first Plan
Year beginning after December 31, 1988 (or such other date on which these
requirements first become effective with respect to this Plan); or (b) are made
effective no later than the first day on which the Employer is no longer
entitled, under regulations, to rely on a reasonable, good faith interpretation
of these requirements, and the prior provisions of the Plan constitute such an
interpretation.
This Adoption Agreement may be used only in conjunction with Basic Plan Document
#01. This Adoption Agreement and the Basic Plan Document shall together be known
as The AAL Mutual Funds Standardized Profit Sharing Plan #001.
The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors.
AAL Capital Management Corporation will notify the Employer of any amendments
made to the Plan or of the discontinuance or abandonment of the Plan provided
this Plan has been acknowledged by AAL Capital Management Corporation or its
authorized representative. Furthermore, in order to be eligible to receive such
notification, we agree to notify AAL Captial Managment Corporation of any change
in address.
16
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on this day of , 19 . Furthermore, this Plan may not be used unless
acknowledged by AAL Capital Management Corporation or its authorized
representative.
EMPLOYER: TRUSTEE:
(enter name) (enter name)
By: By:
PARTICIPATING EMPLOYER:
(enter name)
By:
This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of AAL Capital Management Corporation has
acknowledged the use of the Plan. Such acknowledgment is for ministerial
purposes only. It acknowledges that the Employer is using the Plan but does not
represent that this Plan, including the choices selected on the Adoption
Agreement, has been reviewed by a representative of the sponsor or constitutes a
qualified retirement plan.
AAL Capital Management Corporation
By:
AAL Capital Management Corporation
222 W. College Ave.
Appleton, WI 54919
(414) 734-5721
17
<PAGE>
ADOPTION AGREEMENT FOR
THE AAL MUTUAL FUNDS PROTOTYPE
STANDARDIZED MONEY PURCHASE
PLAN AND TRUST
(WITH PAIRING PROVISIONS)
The undersigned Employer adopts The AAL Mutual Funds Standardized Money
Purchase Plan for those Employees who shall qualify as Participants hereunder,
to be known as the
A1
(Enter Plan Name)
The Plan shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:
CAUTION: The failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.
EMPLOYER INFORMATION
B1 NAME OF EMPLOYER
B2 ADDRESS
City State Zip
B3 NAME(S) OF TRUSTEE(S)
NOTE: The Trustee has all investment decision making responsibility unless
the Trustee is Emjay Corporation, in which case the Employer has all
investment decision making responsibility.
B4 ADDRESS OF TRUSTEE(S) a. ( ) Use Employer Address.
b. ( )
Street
City State Zip
B5 EMPLOYER FISCAL YEAR means the 12 consecutive month period commencing
on ------------- (e.g., January 1) and ending on ------------------
month day month day
Copyright 1995 AAL Capital Management Corporation
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<PAGE>
PLAN INFORMATION
C1 EFFECTIVE DATE
This Adoption Agreement for The AAL Mutual Funds Standardized Money
Purchase Plan and Trust shall:
a. ( ) establish a new Plan effective as of (hereinafter called the
"Effective Date").
b. ( ) constitute an amendment and restatement in its entirety of a
previously established qualified Plan of the Employer which was
effective (hereinafter called the "Effective Date"). Except as
specifically provided in the Plan, the effective date of this
amendment and restatement is .
C2 PLAN YEAR means the 12 consecutive month period commencing
on ---------------- (e.g., January 1) and ending on ----------------
month day month day
IS THERE A SHORT PLAN YEAR?
a. ( ) No.
b. ( ) Yes, beginning ------------------------
month day year
and ending -------------------------
month day year
C3 ANNIVERSARY DATE of Plan (Annual Valuation Date).
---------------------------
month day
C4 NAME OF PLAN ADMINISTRATOR. ( Document provides for the Employer to appoint
an Administrator. If none is named, the Employer will become the
Administrator.)
a. ( ) Employer (Use Employer Address).
b. ( ) Name
Address
City State Zip
2
<PAGE>
ELIGIBILITY, VESTING AND RETIREMENT AGE
D1 ELIGIBLE EMPLOYEES (Plan Section 1.24) shall mean:
a. ( ) all Employees.
b. ( ) all Employees except those checked below:
1. ( ) Employees included in a unit of Employees covered by a
collective bargaining agreement between the Employer and
"employee representatives" , if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the employees who are covered pursuant to that agreement are
professionals as defined in Regulation Section 1.410 (b)-9. For
this purpose, the term "employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers, or executives of the
Employer.
2. ( ) Employees who are non-resident aliens and who receive no
earned income (within the meaning of Code Section 911(d)(2)) from
the Employer which constitutes income from sources within the
United States (within the meaning of Code Section 861(a)(3)).
NOTE: The term "Employee" includes any individual employed by an Affiliated
Employer or a Leased Employee.
D2 HOURS OF SERVICE (Plan Section 1.42) will be determined on the basis of the
method selected below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.
a. ( ) On the basis of actual hours for which an Employee is paid or
entitled to payment.
b. ( ) On the basis of days worked. An Employee will be credited with 10
Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the day.
c. ( ) On the basis of weeks worked. An Employee will be credited with 45
Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the week.
d. ( ) On the basis of semi-monthly payroll periods. An Employee will be
credited with 95 Hours of Service if under the Plan such Employee
would be credited with at least 1 Hour of Service during the
semi-monthly payroll period.
e. ( ) On the basis of months worked. An Employee will be credited with
190 Hours of Service if under the Plan such Employee would be credited
with at least 1 Hour of Service during the month.
D3 YEAR OF SERVICE (Plan Section 1.82) and 1-YEAR BREAK IN SERVICE (Plan
Section 1.55) will be determined as follows:
ELIGIBILITY. If the Plan provides for a service requirement of 1 Year or 2 Years
of Service the eligibility computation periods following the initial eligibility
computation period shall be based on (check either a. or b.):
a. ( ) Anniversary of the initial eligibility computation period.
b. ( ) Plan Year.
3
<PAGE>
To complete a Year of Service for purposes of Eligibility, the following number
of Hours of Service must be completed during the eligibility computation period
(check one):
c. ( ) 1000.
d. ( ) 750.
e. ( ) Other ---------------
(Cannot specify more than 1000).
VESTING. To determine the Vested percentage of a Participant's Accrued Benefit,
the vesting computation period shall be based on (check either f. or g.):
f. ( ) Plan Year.
g. ( ) 12-month period beginning ---------------.
To complete a Year of Service for purposes of Vesting, the following number of
Hours of Service must be completed during the vesting computation period (check
one):
h. ( ) 1000.
i. ( ) 750.
j. ( ) Other -------------------
(Cannot specify more than 1000).
BENEFIT ACCRUAL. To be entitled to an allocation of the Employer's contribution,
the accrual computation period shall be based on (check either k. or l.):
k. ( ) Plan Year.
l. ( ) 12-month period beginning ---------------- .
To complete a Year of Service for purposes of Benefit Accrual, the following
number of Hours of Service must be completed during the accrual computation
period (check one):
m. ( ) 501.
n. ( ) Other -------------
(Cannot specify more than 501).
1-YEAR BREAK IN SERVICE. The number of Hours of Service required to avoid a
1-Year Break in Service shall be (checked either o. or p.):
o. ( ) 501 Hours of Service.
p. ( ) Other -------------
(Cannot specify more than 501).
4
<PAGE>
D4 CONDITIONS OF ELIGIBILITY (Plan Section 3.1). Any Eligible Employee may
become an Active Participant under the Plan if such Eligible Employee has
satisfied the age and service requirements, if any, specified below (Check
either a. OR b. and c., and if applicable, d.):
a. ( ) NO AGE OR SERVICE REQUIRED.
b. ( ) SERVICE REQUIREMENT. (May not exceed 2 Years of Service. If more
than 1 Year of Service is required, 100% immediate vesting is
mandatory.)
1. ( ) N/A - No service requirement.
2. ( ) 1/2 Year of Service.
3. ( ) 1 Year of Service.
4. ( ) 11/2Years of Service.
5. ( ) 2 Years of Service.
6. ( ) Other --------------
NOTE: If the service requirement selected is other than a whole number of
Years of Service, an Employee will not be required to complete any
specified number of Hours of Service to satisfy such service
requirement.
c. ( ) AGE REQUIREMENT (may not exceed 21).
1. ( ) N/A - No age requirement.
2. ( ) 201/2.
3. ( ) 21.
4. ( ) Other ----------------
d. ( ) FOR NEW PLANS ONLY - The age and/or service requirements above are
waived as specified below in the case of any Eligible Employee who is
employed on ------------------ (check whichever is applicable):
1. ( ) Age requirement only.
2. ( ) Service requirement only.
3. ( ) Both age and service requirements.
D5 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.1) An Eligible Employee
shall become an Active Participant as of:
a. ( ) The first day of the Plan Year in which he meets the requirements
in D4 above.
b. ( ) The first day of the Plan Year in which he meets the requirements
in D4 above, if he meets such requirements in the first 6 months of
the Plan Year, or as of the first day of the next succeeding Plan Year
if he meets such requirements in the last 6 months of the Plan Year.
c. ( ) The earlier of the first day of the seventh month or the first day
of the Plan Year coinciding with or next following the date on which
he meets the requirements in D4 above.
5
<PAGE>
d. ( ) The first day of the Plan Year next following the date on which he
meets the requirements in D4 above. (Service requirement must be 1/2
Year of Service or less or 1 1/2Years of Service or less if 100%
immediate vesting is selected, and age requirement must be 20 1/2or
less.)
e. ( ) The first day of the Plan Year or the first day of any month
thereafter coinciding with or next following the date on which he
meets the requirements in D4 above.
f. ( ) The first day of the Plan Year quarter coinciding with or next
following the date on which he meets the requirements in D4 above.
g. ( ) Other ----------------------------------------- provided that an
Eligible Employee who has satisfied the maximum age and service
requirements that are permissible in D4 above, shall become an Active
Participant no later than the earlier of (1) 6 months after such
requirements are satisfied, or (2) the first day of the first Plan
Year after such requirements are satisfied, unless the Employee
separates from service before such date.
D6 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4 (b)). The vesting
schedule, based on number of Years of Service, shall be as follows:
a. ( ) 100% upon entering Plan. (Required if service requirement in
D4 is greater than 1 Year of Service.)
b. ( ) 0-2 years 0% c. ( ) 0-4 years 0%
3 years 100% 5 years 100%
d. ( ) 0-1 year 0% e. ( ) 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80%
6 years 100%
f. ( ) 1 year 20% g. ( ) 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%
h. ( ) Other. Must be at least as liberal as either c. or g. above.
Years of Service Percentage
6
<PAGE>
D7 FOR AMENDED PLANS (Plan Section 6.4 (f)). If the vesting schedule has been
amended to a less favorable schedule, enter the pre-amended schedule below:
a. ( ) N/A - Vesting schedule has not been amended or amended schedule is
more favorable in all years.
b. ( ) Years of Service Percentage
D8 TOP HEAVY VESTING (Plan Section 6.4 (c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule shall apply and shall be treated as a
Plan amendment pursuant to this Plan. Once effective, this schedule shall
continue to apply whether or not the Plan is a Top Heavy Plan.
a. ( ) N/A (D6a., b., d., e. or f. was selected).
b. ( ) 0-1 year 0% c. ( ) 0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
d. ( ) Other. Must be at least as liberal as either b. or c. above.
Years of Service Percentage
NOTE: This section does not apply to the Employer Contribution Account of
any Participant who does not have an Hour of Service after the Plan
becomes a Top Heavy Plan. The Vested percentage of the Employer
Contribution Account of such a Participant will be determined without
regard to this Section D8.
D9 VESTING (Plan Section 6.4 (h)). In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:
a. ( ) Service prior to the Effective Date of the Plan or a
predecessor plan. b. ( ) N/A.
c. ( ) Service prior to the vesting computation period in which an
Employee attains age eighteen. d. ( ) N/A.
7
<PAGE>
D10 PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER (Plan Section 1.82).
a. ( ) No.
b. ( ) Yes. Service with shall be recognized for the following purposes
under the Plan:
1. ( ) Eligibility.
2. ( ) Vesting.
3. ( ) Both eligibility and vesting.
D11 NORMAL RETIREMENT AGE (Plan Section 1.53) means (check one):
a. ( ) the date on which a Participant attains age --- (not to exceed 65)
b. ( ) the later of the date a Participant attains age --- (not to exceed
65) or the first day of the Plan Year in which occurs the --- (not to
exceed fifth) anniversary of the date he became an Active Participant.
c. ( ) Other ---------------------------------------, but in no event
later than the date a Participant attains age 65 or, if later, the
first day of the Plan Year in which occurs the fifth anniversary of
the date he became an Active Participant.
D12 EARLY RETIREMENT (Plan Section 1.21) means a Participant's termination of
employment occurring on or after (check one):
a. ( ) the date on which a Participant attains age ---.
b. ( ) date on which a Participant attains age --- and has completed at
least --- Years of Service for vesting purposes.
c. ( ) the later of the date on which a Participant attains age --- or
the --- anniversary of the date on which he first became an Active
Participant.
d. ( ) the later of the date on which a Participant attains age --- or
the --- anniversary of the date on which he was first credited with an
Hour of Service.
e. ( )
f. ( ) N/A - No Early Retirement provision provided.
CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
E1 a. COMPENSATION (Plan Section 1.15) shall be based on (check one):
1. ( ) the 12-month period designated in Section D3 for the purpose
of determining a Year of Service for benefit accrual.
2. ( ) the Fiscal Year ending during the Plan Year.
3. ( ) the calendar year ending during the Plan Year.
8
<PAGE>
b. For the Plan Year in which an Eligible Employee becomes an Active
Participant pursuant to Section 3.1(a) of the Plan, Compensation shall
be recognized from. . .
1. ( ) the first day of the period selected in a. above.
2. ( ) the date the Eligible Employee becomes an Active Participant.
c. Shall amounts which are not currently includible in the Participant's
gross income by reason of the application of Code Sections 125,
402(e)(3), 402(h)(1)(B) and 403(b) be treated as Compensation?
1. ( ) Yes.
2. ( ) No.
E2 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION (Plan Section 4.1). The
Employer's contribution shall be (checked either a. or b.)...
a. ( ) ---- % of each Active Participant's Compensation.
b. ( ) ---- % (base contribution percentage) of each Active
Participants's Compensation, plus % (excess contribution percentage)
of each Active Participant's Compensation in excess of (check one)...
1. ( ) $------- .
2. ( ) ---- % of the Taxable Wage Base in effect at the beginning of
the 12-month period designated in Section D3 for the purpose of
determining a Year of Service for benefit accrual.
3. ( ) Twenty percent of the Taxable Wage Base in effect at the
beginning of the 12-month period designated in Section D3 for the
purpose of determinig a Year of Service for benefit accrual.
NOTE: If E2b. is selected the excess contribution percentage cannot exceed
the Maximum Excess Percentage under Plan Section 1.52. Section E2b.
cannot be selected if the annual overall permitted disparity limit
under Plan Section 4.9(a) applies.
9
<PAGE>
E3 FORFEITURES (Plan Section 4.3 (c)).
a. ( ) Forfeitures shalll be used to reduce the Employer's
contributionunder the plan.
b. ( ) Forfeitures shall be allocated to all Active Participants entitles
to an allocation for the Plan Year in the proportion that each Active
Participant's Compensation bears to the Compensation of all Active
Participants.
E4 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
a. If any Active Participant is covered under one or more defined
contribution plans maintained by the Employer or any Affiliated
Employer, all of which are Prototype Plans, or under a welfare benefit
fund, as defined in Code Section 419(e), or an individual medical
account, as defined in Code Section 415(1)(2), then the Excess Amount
attributed to this Plan shall equal. . .
1. ( ) N/A.
2. ( ) The product of:
(i) The total Excess Amount allocated as of such date (including
any amount which would have been allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as
of such date under this Plan divided by (B) the total amount
allocated as of such date under this Plan and all such other
defined contribution plans (determined without regard to the
limitations of Code Section 415).
10
<PAGE>
3. ( ) The total Excess Amount.
4. ( ) No part of the Excess Amount.
NOTE: If the Employer adopts Paired Plan #001, Paired Plan #003 or both such
Paired Plans, the Employer must coordinate its elections under each
Adoption Agreement.
b. If any Active Participant is covered under one or more qualified
defined contribution plans maintained by the Employer or an Affiliated
Employer which are not Prototype Plans, then. . .
1. ( ) N/A.
2. ( ) The provisions of Section 4.4(b) of the Plan will apply as if
the other plan or plans were Prototype Plans.
3. ( ) Provide the method under which this Plan and such other
defined contribution plans will limit total Annual Additions to
the Maximum Permissible Amount, and will properly reduce any
Excess Amount in a manner that precludes Employer discretion.
c. If any Participant is or ever has been a participant in a defined
benefit plan maintained by the Employer or any Affiliated Employer,
then. . .
1. ( ) N/A.
2. ( ) In any Limitation Year, the Annual Additions credited to the
Participant under this Plan may not cause the sum of the Defined
Benefit Fraction and the Defined Contribution Fraction to exceed
1.0. If the Employer's contribution that would otherwise be made
on the Participant's behalf during the Limitation Year would
cause the 1.0 limitation to be exceeded, the rate of contribution
under this Plan will be reduced so that the sum of the fractions
equals 1.0. If the 1.0 limitation is exceeded because of an
Excess Amount, such Excess Amount will be reduced in accordance
with Section 4.4(a)(4) of the Plan.
3. ( ) In any Limitation Year, the Projected Annual Benefit of a
Participant under a defined benefit plan may not cause the sum of
the Defined Benefit Fraction and the Defined Contribution
Fraction to exceed 1.0. If the Projected Annual Benefit of a
Participant during the Limitation Year would cause the 1.0
limitation to be exceeded, then the Projected Annual Benefit
shall be reduced so that the sum of the fractions does not exceed
1.0.
4. ( ) Provide the method under which this Plan and any defined
benefit plan will satisfy the 1.0 limitation in a manner that
precludes Employer discretion.
11
<PAGE>
E5 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h)). Distributions upon the
death of a Participant prior to receiving any benefits shall (check one). .
a. ( ) be made pursuant to the election of the Beneficiary.
b. ( ) begin within one year of death for a designated Beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such Beneficiary, except that if the Beneficiary is the
Participant's spouse, within the time the Participant would have
attained age 70 1/2.
c. ( ) be made within 5 years of death for all Beneficiaries.
E6 LIFE EXPECTANCIES (Plan Sections 6.5(d) and 6.6(h)) for minimum
distributions required pursuant to Code Section 401(a)(9) shall (check
one). . .
a. ( ) be recalculated at the election of the Participant or his spouse,
as the case may be.
b. ( ) be recalculated.
c. ( ) not be recalculated.
E7 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION (Plan Section 6.5(c)(1)).
Distributions upon termination of employment pursuant to Section 6.4(a) of
the Plan shall not be made unless the following conditions have been
satisfied (check one):
a. ( ) N/A. Immediate distributions may be made at the Participant's
election.
b. ( ) The first day of the Plan Year following the Plan Year in which
the Participant has incurred ----- 1-Year Break(s) in Service.
c. ( ) The Participant's ----- anniversary of his termination of
employment.
d. ( ) The first day of the Plan Year following the Plan Year in which
occurs the Participant's ----- anniversary of his termination of
employment.
e. ( ) The day on which the Participant attains age --- (age inserted
cannot be later than Normal Retirement Age).
f. ( ) The Participant has satisfied the conditions for Early Retirement,
has attained Normal Retirement Age or has become Totally and
Permanently Disabled.
g. ( ) The Particiapnt's Vested Accurred Benefit under the Plan is not
greater than $ ------. If his Vested Accrued Benefit exceeds such
amount, then no distribution shall be made until the Participant has
satisfied the conditions for Early Retirement, has attained Normal
Retirement Age or has become Totally and Permanently Disabled.
NOTE: Regardless of the above, for a Participant whose Vested Accrued
Benefit is $3,500 or less, the Plan provides for immediate payment of
his Vested Accrued Benefit.
12
<PAGE>
E8 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6). Distributions under the
Plan may be made in annuites and. . .
a. ( ) N/A - no other forms are available
b. ( ) in lump sums.
c. ( ) in lump sums or installments.
AND may be made in...
d. ( ) cash only (except for annuity contracts).
e. ( ) cash or property.
TOP HEAVY REQUIREMENTS
F1 TOP HEAVY DUPLICATIONS/DEFINED BENEFIT PLAN (Plan Section 4.3(d)). When a
Non-Key Employee is an Active Participant in this Plan and a participant in
a defined benefit plan maintained by the Employer or an Affiliated
Employer, indicate which method shall be utilized to avoid duplication of
top heavy minimum benefits and contributions (check one).
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; this Plan and the defined benefit plan will both provide top
heavy minimum contributions and benefits.
c. ( ) A minimum, non-integrated contribution of 5% of each Non-Key
Employee's 415 Compensation shall be provided in this Plan.
d. ( ) A top heavy minimum benefit shall be provided under the defined
benefit plan.
e. ( ) Specify the method under which this Plan and such other defined
benefit plan will provide top heavy minimum benefits or contributions
for Non-Key Employees that will preclude Employer discretion.
F2 ENHANCED MINIMUMS (Plan Section 4.4(e)). When the Employer, an Affiliated
Employer or both maintain a defined benefit plan, indicate whether this
Plan or the defined benefit plan will provide an enhanced top heavy minimum
benefit or contribution in order to preserve the use of 1.25 in the
computation of the denominator of the Defined Benefit Fraction and Defined
Contribution Fraction (check one):
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; an enhanced top heavy minimum benefit or contribution will
not be provided.
c. ( ) The enhanced top heavy minimum contribution will be provided in
this Plan.
d. ( ) The enhanced top heavy minimum benefit will be provided in the
defined benefit plan.
13
<PAGE>
F3 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2). Where the Employer or
an Affiliated Employer maintains a defined benefit plan in addition to this
Plan, the present value of accrued benefits under the defined benefit plan
shall be determined on the basis of the following assumptions:
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) Preretirement Interest Rate
Postretirement Interest Rate
Preretirement Mortality
Postretirement Mortality
F4 TOP HEAVY DUPLICATIONS/DEFINED CONTRIBUTION PLAN (Plan Section 4.3(d)).
When a Non-Key Employee is an Active Participant in this Plan and is a
participant in another defined contribution plan (other than a Paired Plan)
maintained by the Employer or an Affiliated Employer, indicate which method
shall be utilized to avoid duplication of top heavy minimum contributions.
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains
another defined contribution plan (other than a Paired Plan).
b. ( ) N/A; this Plan and such other defined contribution plan will both
provide top heavy minimum contributions.
c. ( ) The top heavy minimum contribution shall be provided in this Plan.
d. ( ) The top heavy minimum contribution shall be provided in such other
defined contribution plan.
e. ( ) Specify the method under which the Plan and such other defined
contribution plan will provide top heavy minimum contributions for
Non-Key Employees that will preclude Employer discretions.
F5 TOP HEAVY MINIMUM CONTRIBUTIONS (Plan Section 4.3(d)) shall be provided
(check either a. or b.). . .
a. ( ) only to Non-Key Employees.
b. ( ) without regard to whether an Active Participant is a Non-Key
Employee.
14
<PAGE>
MISCELLANEOUS
G1 LOANS TO PARTICIPANTS (Plan Section 7.5).
a. ( ) Yes, loans may be made.
b. ( ) Yes, loans may be made but only in the event of a financial
hardship.
c. ( ) No, loans may not be made.
If YES, must the loan be for a minimum amount (check either d. or e.)?
d. ( ) Yes. The minimum loan amount must be $----- (insert dollar amount
not greater than $1000).
e. ( ) No.
If loans are permitted, can a Participant have more than one loan
outstanding at the same time (check either f. or g.)?
f. ( ) Yes.
g. ( ) No.
G2 PARTICIPANT INVESTMENT OF ACCOUNTS (Plan Section 7.4).
a. ( ) No, Participants are not permitted to direct the investment of
their Accounts.
b. ( ) Yes, Participants are permitted to direct the investment of their
Accounts, but only if they have attained age -----. (Indicate age or
N/A, if attainment of a certain age is not required.)
If YES, Participant direction extends to all Accounts except for the
Accounts checked below:
c. ( ) Employer Contribution Account.
d. ( ) Rollover Account.
e. ( ) Voluntary Contribution Account.
f. ( ) Qualified Voluntary Employee Contribution Account.
g. ( ) Mandatory Contribution Account.
NOTE: INVESTMENT OF THE TRUST FUND IS RESTRICTED TO AAL MUTUAL FUNDS OR SUCH
OTHER INVESTMENTS PERMITTED BY AAL CAPITAL MANAGEMENT CORPORATION
(PLAN SECTION 7.2).
G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.5).
a. ( ) Yes, transfers from qualified plans (and rollovers) will be
allowed.
b. ( ) No, transfers from qualified plans (and rollovers) will not be
allowed.
If YES, withdrawals from a Participant's Rollover Account shall. . .
c. ( ) be permitted.
d. ( ) not be permitted.
15
<PAGE>
G4 IN-SERVICE DISTRIBUTIONS (Plan Section 6.10).
a. ( ) Yes, in-service distributions are permitted.
b. ( ) No, in-service distributions are not permitted.
Note: If a. is selected, distributions may be made only after the
Participant has attained Normal Retirement Age.
-
An Employer who has ever maintained or who later adopts any plan in addition to
this Plan (including a welfare benefit fund, as defin - ed in Code Section
419(e), which provides post-retirement medical benefits allocated to separate
accounts for Key Employees, as defined in Code Section 419A(d)(3), or an
individual medical account, as defined in Code Section 415(1)(2)) (other than
Paired Plans #001, #003) may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan is
qualified under Code Section 401. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that this Plan is qualified,
application for a determination letter should be made to the appropriate Key
District Office.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under Code
Section 401 unless the terms of the Plan, as herein adopted or amended, that
pertain to the requirements of Code Sections 401(a)(4), 401(a)(17), 401(1),
401(a)(5), 410(b) and 414(s), as amended by the Tax Reform Act of 1986 or later
laws, (a) are made effective retroactively to the first day of the first Plan
Year beginning after December 31, 1988 (or such other date on which these
requirements first become effective with respect to this Plan); or (b) are made
effective no later than the first day on which the Employer is no longer
entitled, under regulations, to rely on a reasonable, good faith interpretation
of these requirements, and the prior provisions of the Plan constitute such an
interpretation.
This Adoption Agreement may be used only in conjunction with Basic Plan Document
#01. This Adoption Agreement and the Basic Plan Document shall together be known
as The AAL Mutual Funds Standardized Money Purchasing Plan #002.
The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors.
AAL Capital Management Corporation will notify the Employer of any amendments
made to the Plan or of the discontinuance or abandonment of the Plan provided
this Plan has been acknowledged by AAL Capital Management Corporation or its
authorized representative. Furthermore, in order to be eligible to receive such
notification, we agree to notify AAL Captial Managment Corporation of any change
in address.
16
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on this day of -------, 19-- . Furthermore, this Plan may not be used
unless acknowledged by AAL Capital Management Corporation or its authorized
representative.
EMPLOYER: TRUSTEE:
(enter name) (enter name)
By: By:
PARTICIPATING EMPLOYER:
(enter name)
By:
This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of AAL Capital Management Corporation has
acknowledged the use of the Plan. Such acknowledgment is for ministerial
purposes only. It acknowledges that the Employer is using the Plan but does not
represent that this Plan, including the choices selected on the Adoption
Agreement, has been reviewed by a representative of the sponsor or constitutes a
qualified retirement plan.
AAL Capital Management Corporation
By:
AAL Capital Managemant Corporation
222 W. College Avenue
Appleton, WI 54919
(414) 734-5721
17
<PAGE>
ADOPTION AGREEMENT FOR
THE AAL MUTUAL FUNDS PROTOTYPE
STANDARDIZED 401(k) PROFIT SHARING
PLAN AND TRUST
(WITH PAIRING PROVISIONS)
The undersigned Employer adopts The AAL Mutual Funds Standardized 401(k)
Profit Sharing Plan for those Employees who shall qualify as Participants
hereunder, to be known as the
A1
(Enter Plan Name)
The Plan shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:
CAUTION: The failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.
EMPLOYER INFORMATION
B1 NAME OF EMPLOYER
B2 ADDRESS
City State Zip
B3 NAME(S) OF TRUSTEE(S)
NOTE: The Trustee has all investment decision making responsibility unless
the Trustee is Emjay Corporation, in which case the Employer has all
investment decision making responsibility.
B4 ADDRESS OF TRUSTEE(S) a. ( ) Use Employer Address.
b. ( )
Street
City State Zip
B5 EMPLOYER FISCAL YEAR means the 12 consecutive month period commencing
on ---------------- (e.g., January 1) and ending on ------------------.
month day month day
Copyright 1995 AAL Capital Management Corporation
1
<PAGE>
PLAN INFORMATION
C1
EFFECTIVE DATE
This Adoption Agreement for The AAL Mutual Funds Standardized 401(k) Profit
Sharing Plan and Trust shall:
a. ( ) establish a new Plan effective as of -----------------
(hereinafter called the "Effective Date").
b. ( ) constitute an amendment and restatement in its entirety of a
previously established qualified Plan of the Employer which was
effective ------------------- (hereinafter called the "Effective
Date"). Except as specifically provided in the Plan, the
effective date of this amendment and restatement is -------------.
C2 PLAN YEAR means the 12 consecutive month period commencing
on ------------------ (e.g., January 1) and ending on -----------------.
month day month day
IS THERE A SHORT PLAN YEAR?
a. ( ) No.
b. ( ) Yes, beginning -----------------------
month day year
and ending -----------------------
month day year
C3 ANNIVERSARY DATE of Plan (Annual Valuation Date).
----------------------
month day
C4 NAME OF PLAN ADMINISTRATOR. (Document provides for the Employer to appoint
an Administrator. If none is named, the Employer will become the
Administrator.)
a. ( ) Employer (Use Employer Address).
b. ( ) Name
Address
City State Zip
2
<PAGE>
ELIGIBILITY, VESTING AND RETIREMENT AGE
D1 ELIGIBLE EMPLOYEES (Plan Section 1.24) shall mean:
a. ( ) all Employees.
b. ( ) all Employees except those checked below:
1. ( ) Employees included in a unit of Employees covered by a
collective bargaining agreement between the Employer and
"employee representatives", if retirement benefits were the
subject of good faith bargaining and and if two percent or less
of the employees who are covered pursuant to that agreement are
professionals as defined in Regulation Section 1.410 (b)-9. For
this purpose, the term "employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers, or executives of the
Employer.
2. ( ) Employees who are non-resident aliens and who receive no earned
income (within the meaning of Code Section 911(d)(2)) from the
Employer which constitutes income from sources within the United
States (within the meaning of Code Section 861(a)(3)).
NOTE: The term "Employee" includes any individual employed by an Affiliated
Employer or a Leased Employee.
D2 HOURS OF SERVICE (Plan Section 1.42) will be determined on the basis of the
method selected below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.
a. ( ) On the basis of actual hours for which an Employee is paid
or entitled to payment.
b. ( ) On the basis of days worked. An Employee will be credited
with 10 Hours of Service if under the Plan such Employee
would be credited with at least 1 Hour of Service during the
day.
c. ( ) On the basis of weeks worked. An Employee will be credited
with 45 Hours of Service if under the Plan such Employee
would be credited with at least 1 Hour of Service during the
week.
d. ( ) On the basis of semi-monthly payroll periods. An Employee
will be credited with 95 Hours of Service if under the Plan
such Employee would be credited with at least 1 Hour of
Service during the semi-monthly payroll period.
e. ( ) On the basis of months worked. An Employee will be credited
with 190 Hours of Service if under the Plan such Employee
would be credited with at least 1 Hour of Service during the
month.
3
<PAGE>
D3 YEAR OF SERVICE (Plan Section 1.82) and 1-YEAR BREAK IN SERVICE (Plan
Section 1.55) will be determined as follows:
ELIGIBILITY. If the Plan provides for a service requirement of 1 Year of
Service the eligibility computation periods following the initial
eligibility computation period shall be based on (check either a. or b.):
a. ( ) Anniversary of the initial eligibility computation period.
b. ( ) Plan Year.
To complete a Year of Service for purposes of Eligibility, the following number
of Hours of Service must be completed during the eligibility computation period
(check one):
c. ( ) 1000.
d. ( ) 750.
e. ( ) Other ---------------- (Cannot specify more than 1000).
VESTING. To complete a Year of Service for purposes of Vesting, the following
number of Hours of Service must be completed during the Plan Year. (check one):
f. ( ) 1000.
g. ( ) 750.
h. ( ) Other ---------------- (Cannot specify more than 1000).
BENEFIT ACCRUAL. To complete a Year of Service for purposes of benefit accrual,
the following number of Hours of Service must be completed during the Plan Year:
Year End
Matching/Qualified
Matching Contributions ---------
Discretionary Non-Elective
Contributions ---------
Year End
Fixed/Qualified
Non-Elective Contributions ---------
Note: If the Plan does not provide a certain form of contribution, leave the
line blank. Not more than 501 may be specified.
1-YEAR BREAK IN SERVICE. The number of Hours of Service required to avoid a
1-Year Break in Service shall be (checked either i. or j.):
i. ( ) 501 Hours of Service.
j. ( ) Other --------------- (Cannot specify more than 501).
4
<PAGE>
D4 CONDITIONS OF ELIGIBILITY (Plan Section 3.1). Any Eligible Employee may
become an Active Participant under the Plan if such Eligible Employee has
satisfied the age and service requirements, if any, specified below (Check
either a. OR b. and c., and if applicable, d.):
a. ( ) NO AGE OR SERVICE REQUIRED.
b. ( ) SERVICE REQUIREMENT. (May not exceed 1 Year of Service.)
1. ( ) N/A - No service requirement.
2. ( ) 1/2 Year of Service.
3. ( ) 1 Year of Service.
4. ( ) Other ------------------
.
NOTE: If the service requirement selected is other than a 1
Year of Service, an Employee will not be required to
complete any specified number of Hours of Service to
satisfy such service requirement.
c. ( ) AGE REQUIREMENT (may not exceed 21).
1. ( ) N/A - No age requirement.
2. ( ) 201/2.
3. ( ) 21.
4. ( ) Other ------------------
.
d. ( ) FOR NEW PLANS ONLY - The age and/or service requirements
above are waived as specified below in the case of any
Eligible Employee who is employed on check whichever is
applicable):
1. ( ) Age requirement only.
2. ( ) Service requirement only.
3. ( ) Both age and service requirements.
Note: A new Plan shall include any existing Plan that is amended to add a
cash or deferred arrangement under Code Section 401(k).
D5 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.1) An Eligible Employee
shall become an Active Participant as of:
a. ( ) The first day of the Plan Year in which he meets the
requirements in D4 above.
b. ( ) The first day of the Plan Year in which he meets the
requirements in D4 above, if he meets such requirements in
the first 6 months of the Plan Year, or as of the first day
of the next succeeding Plan Year if he meets such
requirements in the last 6 months of the Plan Year.
c. ( ) The earlier of the first day of the seventh month or the
first day of the Plan Year coinciding with or next following
the date on which he meets the requirements in D4 above.
d. ( ) The first day of the Plan Year next following the date on
which he meets the requirements in D4 above. (Service
requirement must be 1/2 Year of Service or less and age
requirement must be 20 1/2 or less.)
e. ( ) The first day of the Plan Year, or the first day of any
month thereafter coinciding with or next following the date
on which he meets the requirements in D4 above.
f. ( ) The first day of the Plan Year quarter coinciding with or
next following the date on which he meets the requirements
in D4 above.
g. ( ) Other ------------------------------------------------------
provided that an Eligible Employee who has satisfied the
maximum age and service requirements that are permissible in
D4 above, shall become an Active Participant no later than
the earlier of (1) 6 months after such requirements are
satisfied, or (2) the first day of the first Plan Year after
such requirements are satisfied, unless the Employee
separates from service before such date.
5
<PAGE>
D6 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4 (b)). The vesting
schedule, based on number of Years of Service, shall be as follows:
a. ( ) 100% upon entering Plan.
b. ( ) 0-2 years 0% c. ( ) 0-4 years 0%
3 years 100% 5 years 100%
d. ( ) 0-1 year 0% e. ( ) 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80%
6 years 100%
f. ( ) 1 year 20% g. ( ) 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%
h. ( ) Other. Must be at least as liberal as either c. or g. above.
Years of Service Percentage
D7 FOR AMENDED PLANS (Plan Section 6.4 (f)). If the vesting schedule has been
amended to a less favorable schedule, enter the pre-amended schedule below:
a. ( ) N/A - Vesting schedule has not been amended or amended schedule
is more favorable in all years.
b. ( ) Years of Service Percentage
6
<PAGE>
D8 TOP HEAVY VESTING (Plan Section 6.4 (c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule shall apply and shall be treated as a
Plan amendment pursuant to this Plan. Once effective, this schedule shall
continue to apply whether or not the Plan is a Top Heavy Plan.
a. ( ) N/A (D6a., b., d., e. or f. was selected).
b. ( ) 0-1 year 0% c. ( ) 0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
d. ( ) Other. Must be at least as liberal as either b. or c. above.
Years of Service Percentage
NOTE: This section does not apply to the Accounts of any Participant who
does not have an Hour of Service after the Plan becomes a Top Heavy
Plan. The Vested percentage of the Accounts of such a Participant will
be determined without regard to this Section D8.
D9 VESTING (Plan Section 6.4 (h)). In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:
a. ( ) Service prior to the Effective Date of the Plan or a
predecessor plan. b. ( ) N/A.
c. ( ) Service prior to the vesting computation period in which an
Employee attains age eighteen. d. ( ) N/A.
D10 PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER (Plan Section 1.82).
a. ( ) No.
b. ( ) Yes. Service with -----------------shall be recognized for the
following purposes under the Plan:
1. ( ) Eligibility.
2. ( ) Vesting.
3. ( ) Both eligibility and vesting.
7
<PAGE>
D11 NORMAL RETIREMENT AGE (Plan Section 1.53) means (check one):
a. ( ) the date on which a Participant attains age ------
(not to exceed 65).
b. ( ) the later of the date a Participant attains age ------
(not to exceed 65) or the first day of the Plan Year in
which occurs the ------ (not to exceed fifth) anniversary
of the date he became an Active Participant.
c. ( ) Other --------------------------------------------------------
but in no event later than the date a Participant
attains age 65 or, if later, the first day of the
Plan Year in which occurs the fifth anniversary of
the date he became an Active Participant.
D12 EARLY RETIREMENT (Plan Section 1.21) means a Participant's termination of
employment occurring on or after (check one):
a. ( ) the date on which a Participant attains age ------
b. ( ) date on which a Participant attains age ------
and has completed at least ------
Years of Service for vesting purposes.
c. ( ) the later of the date on which a Participant attains
age ------ or the ------- anniversary of the date on which
he first became an Active Participant.
d. ( ) the later of the date on which a Participant attains age ------
or the ------ anniversary of the date on which he was first
credited with an Hour of Service.
e. ( ) ---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
f. ( ) N/A - No Early Retirement provision provided.
CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
E1 COMPENSATION (Plan Section 1.15)
a. COMPENSATION shall be taken into account from the first day of
the Plan Year in which an Eligible Employee becomes an Active
Participant pursuant to Section 3.1 (a) of the Plan for the
following purposes:
1. Discrentionary Non-Elective Contributions. ( ) Yes ( ) No ( ) N/A
2. Year End Fixed Non-Elective Contributions. ( ) Yes ( ) No ( ) N/A
3. Year End Matching Contributions. ( ) Yes ( ) No ( ) N/A.
b. Shall amounts which are not currently includible in the
Participant's gross income by reason of the application of
Code Sections 125, 402(e)(3), 402(h)(1)(B) and 403(b) be
treated as Compensation?
1. ( ) Yes.
2. ( ) No.
8
<PAGE>
E2 DEFERRAL ELECTIONS - ELECTIVE CONTRIBUTIONS (Plan Section 11.3)
a. Each Active Participant may elect to have his Compensation reduced by:
1. ( ) -------- %.
2. ( ) Up to -------- %.
3. ( ) From --------- % to --------- %.
4. ( ) Up to any percentage which will not cause the amount of
Elective Contributions allocated to a Participant's
Elective Account to exceed the limits of Code Sections
402(g) and 415.
b. An Active Participant may change his deferral election
in a. above (check one)...
1. ( ) annually, on the first day of the Plan Year.
2. ( ) on the first day of the Plan Year and six months
following the first day of the Plan Year.
3. ( ) on the first day of each quarter of the Plan Year
4. ( ) on the first day of each month of the Plan Year.
5. ( ) at such times as the Employer may determine.
c. Shall Active Participants be allowed to make a special
deferral election with respect to bonuses?
1. ( ) Yes.
2. ( ) No.
E3 MATCHING CONTRIBUTIONS (Plan Section11.1(a) (2)).
a. Shall the Employer make Matching Contributions ?
1. ( ) Yes.
2. ( ) No.
b. If the Employer shall make Matching contributions, on what
basis shall such contributions be made (check one)?
1. ( ) Ongoing.
2. ( ) Year end.
3. ( ) Both ongoing and year end.
Note: Matching contributions made on an ongoing basis are allocated when
made and without regard to whether an Active Participant has completed
a Year of Service or is employed on the Anniversary Date.
9
<PAGE>
c. If the Employer shall make Matching Contributions on an
ongoing basis, such contributions (check one)...
1. ( ) shall be determined by multiplying each Active
Participant's Deferred Compensation by a percentage to be
determined by the Employer.
2. ( ) shall be determined by multiplying each Active
Participants Deferred Compensation by --------- %.
3. ( ) shall equal --------- % of the Deferred Compensation of
the Active Participant which does not exceed --------- %
of his Compensation (Level 1) plus --------- % of the
Deferred Compensation of the Active Participant which
exceeds -------- % of his Compensation, but does not
exceed -------- % of such Active Participant's
Compensation (Level 2). If the Plan provides for more
than 2 levels of Matching Contributions describe below:
Note: The Matching Contribution percentage at any level cannot exceed the
Matching Contribution percentage at any lower level.
d. If c. 1. or c. 2. is selected, what limitation will apply upon the
amount of Deferred Compensation that may be taken into account for
purposes of determining an Active Participant's allocation of Matching
Contributions (check one) ?
1. ( ) N/A; there is no limitation on the amount of Deferred
Compensation taken into account.
2. ( ) Only Deferred Compensation up to -------- % (insert
percentage) of an Active Participant's Compensation will
be taken into account.
3. ( ) Only Deferred Compensation up to a percentage, determined
by the Employer, of an Active Participant's
Compensation will be taken into account.
e. Shall there be a dollar limitation on the amount of Matching
Contributions made on an ongoing basis (check either 1. or 2.) ?
1. ( ) Yes. Specify dollar amount. $ -------
2. ( ) No.
f. If the Employer shall make Matching Contributions on a year
end basis, must there be current or accumulated Net Profit ?
1. ( ) Yes.
2. ( ) No.
10
<PAGE>
g. If the Employer shall make Matching Contributions on a year end basis,
such contributions (check one)...
1. ( ) shall be determined by multiplying each Active
Participant's Deferred Compensation by a percentage to be
determined by the Employer.
2. ( ) shall be determined by multiplying each Active
Participant's Deferred Compensation by -------- %.
3. ( ) shall equal -------- % of the Deferred Compensation of
the Active Participant which does not exceed -------- %
of his Compensation (Level 1) plus ------- % of the
Deferred Compensation of the Active Participant which
exceeds -------- % of his Compensation, but does not
exceed -------- % of such Active Participant's
Compensation (Level 2). If the Plan provides for
more than 2 levels of Matching Contributions
describe below:
Note: The Matching Contribution percentage at any level cannot exceed the
Matching Contribution percentage at any lower level.
h. If g.1. or g.2. is selected, what limitation will apply upon
the amount of Deferred Compensation that may be taken into
account for purposes of determining an Active Participant's
allocation of Matching Contributions (check one) ?
1. ( ) N/A; there is no limitation on the amount of Deferred
Compensation taken into account.
2. ( ) Only Deferred Compensation up to ------- % (insert
percentage) of an Active Participant's Compensation will
be taken into account.
3. ( ) Only Deferred Compensation up to a percentage, determined
by the Employer, of an Active Participant's
Compensation will be taken into account.
i. Shall there be a dollar limitation on the amount of
Matching Contributions made on a year end basis (check
either 1. or 2.)?
1. ( ) Yes. Specify dollar amount. $ ------
2. ( ) No.
11
<PAGE>
j. If the Employer shall make Matching Contributions, such contributions
shall be (check either 1. or 2.)...
1. ( ) vested in accordance with the schedule elected in Service
D6 or, if applicable, Section D8.
2. ( ) fully vested at all times.
If 2. is selected, Matching Contributions shall (check one)...
3. ( ) be Qualified Matching Contributions at all times.
4. ( ) be Qualified Matching Contributions only if, at the time
Matching Contributions are made, the Employer advises
the Administrator that such contributions
are Qualified Matching Contributions;
otherwise, such contributions shall not be
Qualified Matching Contributions.
5. ( ) not be Qualified Matching Contributions.
E4 DISCRETIONARY NON-ELECTIVE CONTRIBUTIONS (Plan Section 11.1 (a) (3)).
a. Shall the Employer make Discretionary Non-Elective Contributions ?
1. ( ) Yes.
2. ( ) No.
b. If the Employer shall make Discretionary Non-Elective
Contributions, such contributions shall be (checked 1. or
2.)...
1. ( ) Discretionary, out of current or accumulated Net Profit,
to be determined by the Employer.
2. ( ) Discretionary, not limited to Net Profit, to be
determined by the Employer.
c. If the Employer shall make Discretionary Non-Elective
Contributions, such contributions and Forfeitures, if any,
shall be allocated as follows (check either 1. or 2.):
1. ( ) On a non-integrated basis.
2. ( ) On an integrated basis.
If 2. is selected, the integration level will be (check one)...
3. ( ) $ ---------
.
4. ( ) ---------% of the Taxable Wage Base in effect at the
beginning of the Plan Year.
5. ( ) Twenty percent of the Taxable Wage Base in effect at the
beginning of the Plan Year.
and the Maximum Excess Percentage will be (check either 6. or 7.)...
6. ( ) The percentage determined under the Plan.
7. ( ) ------- %.
12
<PAGE>
Shall the allocation of the Employer's Discretionary Non-Elective Contributions
and Forfeitures, if any, be done on the assumption that the Plan is a Top Heavy
Plan (check either 8. or 9.) ?
8. ( ) Yes.
9. ( ) No.
E5 FIXED NON-ELECTIVE CONTRIBUTIONS (Plan Section 11.1 (a) (4)).
a. Shall the Employer make Fixed Non-Elective Contributions ?
1. ( ) Yes.
2. ( ) No.
b. If the Employer shall make Fixed Non-Elective Contributions,
on what basis shall such contributions be made (check either
1. or 2.) ?
1. ( ) Ongoing.
2. ( ) Year end.
Note: Fixed contributions made on an ongoing basis are allocated when made
and without regard to whether an Active Participant has completed a
Year of Service or is employed on the Anniversary Date.
c. If the Employer shall make Fixed Non-Elective Contributions on
a year end basis, must there be current or accumulated Net
Profit ?
1. ( ) Yes.
2. ( ) No.
d. If the Employer shall make Fixed Non-Elective Contributions,
such contributions shall be equal to ------ % of the Compensation of
each Active Participant.
13
<PAGE>
e. If the Employer shall make Fixed Non-Elective Contributions,
such contributions shall be (check either 1. or 2.)
1. ( ) vested in accordance with the schedule elected in Section
D6 or, if applicable, Section D8.
2. ( ) fully vested at all times.
If 2. is selected, Fixed Non-Elective Contributions shall (check one)..
3. ( ) be Qualified Non-Elective Contributions at all times.
4. ( ) be Qualified Non-Elective Contributions only if, at the
time Fixed Non-Elective Contributions are made, the
Employer advises the Administrator that such
contributions are Qualified Non-Elective Contributions;
otherwise, such contributions shall not be
Qualified NonElective Contributions.
5. ( ) not be Qualified Non-Elective Contributions.
E6 MULTIPLE USE OF ALTERNATE LIMITATION (Plan Sections 11.5 and 11.7) shall be
avoided by distributing the following (check one)...
a. ( ) Excess Contributions.
b. ( ) Excess Aggregate Contributions.
c. ( ) N/A.
14
<PAGE>
E7 FORFEITURES (Plan Section 11.4 (b)).
a. Forfeitures arising from a Participant's Discretionary
Non-Elective Account shall be (check one)...
1. ( ) allocated as if they are additional Discretionary
Non-Elective Contributions under the Plan.
2. ( ) used to reduce the Employer's Matching Contributions
under the Plan.
3. ( ) used to reduce the Employer's Fixed Non-Elective
Contributions under the Plan.
4. ( ) N/A; Plan does not provide for Discretionary
Non-Elective Contributions.
b. Forfeitures from a Participant's Fixed Non-Elective Account shall be
(check one)...
1. ( ) used to reduce the Employer's Fixed Non-Elective
Contributions under the Plan.
2. ( ) used to reduce the Employer's Matching Contributions
under the Plan.
3. ( ) allocated as if they are additional Discretionary
Non-Elective Contributions under the Plan.
4. ( ) N/A; Plan does not provide for Fixed Non-Elective
Contributions.
c. Forfeitures from a Participant's Matching Account shall be (check
one)...
1. ( ) used to reduce the Employer's Matching Contributions
under the Plan.
2. ( ) allocated as if they are additional Discretionary
Non-Elective Contributions under the Plan.
3. ( ) used to reduce the Employer's Fixed Non-Elective
Contributions under the Plan.
4. ( ) N/A; Plan does not provide for Matching Contributions.
15
<PAGE>
E8 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
a. If any Active Participant is covered under one or more defined
contribution plans maintained by the Employer or any
Affiliated Employer, all of which are Prototype Plans, or
under a welfare benefit fund, as defined in code Section
419(e), or an individual medical account, as defined in code
Section 415(1)(2), then the Excess Amount attributed to this
Plan shall equal. . .
1. ( ) N/A.
2. ( ) The product of:
(i) The total Excess Amount allocated as of
such date (including any amount which would
have been allocated but for the limitations
of Code Section 415), times
(ii) the ratio of (A) the amount allocated
to the Participant as of such date under
this Plan divided by (B) the total amount
allocated as of such date under this Plan
and all such other defined contribution
plans (determined without regard to the
limitations of Code Section 415).
3. ( ) The total Excess Amount.
4. ( ) No part of the Excess Amount.
NOTE: If the Employer adopts Paired Plan #001, Paired Plan #002 or both such
Paired Plans, the Employer must coordinate its elections under each
Adoption Agreement.
b. If any Active Participant is covered under one or more qualified
defined contribution plans maintained by the Employer or an Affiliated
Employer which are not Prototype Plans, then. . .
1. ( ) N/A.
2. ( ) The provisions of Section 4.4(b) of the Plan will apply
as if the other plan or plans were Prototype Plans.
3. ( ) Provide the method under which this Plan and such other
defined contribution plans will limit total Annual
Additions to the Maximum Permissible Amount, and will
properly reduce any Excess Amount in a manner that
precludes Employer discretion.
16
<PAGE>
c. If any Participant is or ever has been a participant in a
defined benefit plan maintained by the Employer or any
Affiliated Employer, then. . .
1. ( ) N/A.
2. ( ) In any Limitation Year, the Annual Additions
credited to the Participant under this Plan may not
cause the sum of the Defined Benefit Fraction and the
Defined Contribution Fraction to exceed 1.0. If the
Employer's contribution that would otherwise be made on
the Participant's behalf during the Limitation Year
would cause the 1.0 limitation to be exceeded, the rate
of contribution under this Plan will be reduced so that
the sum of the fractions equals 1.0. If the 1.0
limitation is exceeded because of an Excess Amount,
such Excess Amount will be reduced in accordance with
Section 4.4(a)(4) of the Plan.
3. ( ) In any Limitation Year, the Projected Annual
Benefit of a Participant under a defined benefit plan
may not cause the sum of the Defined Benefit Fraction
and the Defined Contribution Fraction to exceed 1.0. If
the Projected Annual Benefit of a Participant during
the Limitation Year would cause the 1.0 limitation to
be exceeded, then the Projected Annual Benefit shall be
reduced so that the sum of the fractions does not
exceed 1.0.
4. ( ) Provide the method under which this Plan and any
defined benefit plan will satisfy the 1.0 limitation in
a manner that precludes Employer discretion.
E9 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h)). Distributions upon the
death of a Participant prior to receiving any benefits shall (check one). .
.
a. ( ) be made pursuant to the election of the Beneficiary.
b. ( ) begin within one year of death for a designated Beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such Beneficiary, except that if the Beneficiary is
the Participant's spouse, within the time the Participant would
have attained age 70 1/2.
c. ( ) be made within 5 years of death for all Beneficiaries.
E10 LIFE EXPECTANCIES (Plan Sections 6.5(d) and 6.6(h)) for minimum
distributions required pursuant to Code Section 401(a)(9) shall (check
one). . .
a. ( ) be recalculated at the election of the Participant or his spouse,
as the case may be.
b. ( ) be recalculated.
c. ( ) not be recalculated.
17
<PAGE>
E11 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION (Plan Section 6.5(c)(1)).
Distributions upon termination of employment pursuant to Section 6.4(a) of
the Plan shall not be made unless the following conditions have been
satisfied (check one):
a. ( ) N/A. Immediate distributions may be made at the Participant's
election.
b. ( ) The first day of the Plan Year following the Plan Year in
which the Participant has incurred ------ 1-Year Break(s) in
Service.
c. ( ) The Participant's --------- anniversary of his termination of
employment.
d. ( ) The first day of the Plan Year following the Plan Year in
which occurs the Participant's --------- anniversary of his
termination of employment.
e. ( ) The day on which the Participant attains age ------- (age
inserted cannot be later than Normal Retirement Age).
f. ( ) The Participant has satisfied the conditions for Early
Retirement, has attained Normal Retirement Age or has become
Totally and Permanently Disabled.
g. ( ) The Participant's Vested Accrued Benefit under the Plan is
not greater than $-------. If his Vested Accrued Benefit exceeds
such amount, then no distribution shall be made until the
Participant has satisfied the conditions for Early
Retirement, has attained Normal Retirement Age or has become
Totally and Permanently Disabled.
NOTE: Regardless of the above, for a Participant whose Vested Accrued
Benefit is $3,500 or less, the Plan provides for immediate payment of
his Vested Accrued Benefit.
E12 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6). Distributions under the
Plan may be made. . .
a. 1. ( ) in lump sums.
2. ( ) in lump sums or installments.
b. AND, pursuant to Plan Secton 6.13,
1. ( ) no annuities are allowed (avoids Joint and Survivor
Annuity rules).
2. ( ) annuities are allowed (Plan Section 6.13 shall not apply).
NOTE: b.1. above may not be elected if this is an amendment to a plan
which permitted annuities as a form of distributions.
c. AND may be made in. . .
1. ( ) cash only (except for annuity contracts).
2. ( ) cash or property.
18
<PAGE>
TOP HEAVY REQUIREMENTS
F1 TOP HEAVY DUPLICATIONS/DEFINED BENEFIT PLAN (Plan Section 4.3(d)). When a
Non-Key Employee is an Active Participant in this Plan and a participant in
a defined benefit plan maintained by the Employer or an Affiliated
Employer, indicate which method shall be utilized to avoid duplication of
top heavy minimum benefits and contributions (check one).
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; this Plan and the defined benefit plan will both provide top
heavy minimum contributions and benefits.
c. ( ) A minimum, non-integrated contribution of 5% of
each Non-Key Employee's 415 Compensation shall be
provided in this Plan.
d. ( ) A top heavy minimum benefit shall be provided under the defined
benefit plan.
e. ( ) Specify the method under which this Plan and such other defined
benefit plan will provide top heavy minimum benefits or
contributions for Non-Key Employees that will
preclude Employer discretion.
F2 ENHANCED MINIMUMS (Plan Section 4.4(e)). When the Employer, an Affiliated
Employer or both maintain a defined benefit plan, indicate whether this
Plan or the defined benefit plan will provide an enhanced top heavy minimum
benefit or contribution in order to preserve the use of 1.25 in the
computation of the denominator of the Defined Benefit Fraction and Defined
Contribution Fraction (check one):
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) N/A; an enhanced top heavy minimum benefit or contribution will
not be provided.
c. ( ) The enhanced top heavy minimum contribution will be provided in
this Plan.
d. ( ) The enhanced top heavy minimum benefit will be provided in the
defined benefit plan.
F3 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2). Where the Employer or
an Affiliated Employer maintains a defined benefit plan in addition to this
Plan, the present value of accrued benefits under the defined benefit plan
shall be determined on the basis of the following assumptions:
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains a
defined benefit plan.
b. ( ) Preretirement Interest Rate
Postretirement Interest Rate
Preretirement Mortality
Postretirement Mortality
19
<PAGE>
F4 TOP HEAVY DUPLICATIONS/DEFINED CONTRIBUTION PLAN (Plan Section 4.3(d)).
When a Non-Key Employee is an Active Participant in this Plan and is a
participant in another defined contribution plan (other than a Paired Plan)
maintained by the Employer or an Affiliated Employer, indicate which method
shall be utilized to avoid duplication of top heavy minimum contributions.
a. ( ) N/A; neither the Employer nor any Affiliated Employer maintains
another defined contribution plan (other than a Paired Plan).
b. ( ) N/A; this Plan and such other defined contribution plan will both
provide top heavy minimum contributions.
c. ( ) The top heavy minimum contribution shall be provided in this Plan.
d. ( ) The top heavy minimum contribution shall be provided in such other
defined contribution plan.
e. ( ) Specify the method under which the Plan and such other defined
contribution plan will provide top heavy minimum contributions for
Non-Key Employees that will preclude Employer discretion.
F5 TOP HEAVY MINIMUM CONTRIBUTIONS (Plan Section 4.3(d)) shall be provided
(check either a. or b.). . .
a. ( ) only to Non-Key Employees.
b. ( ) without regard to whether an Active Participant is a Non-Key
Employee.
MISCELLANEOUS
G1 LOANS TO PARTICIPANTS (Plan Section 7.5).
a. ( ) Yes, loans may be made.
b. ( ) Yes, loans may be made but only in the event of a financial
hardship.
c. ( ) No, loans may not be made.
If YES, must the loan be for a minimum amount (check either d. or e.)?
d. ( ) Yes. The minimum loan amount must be $--------- (insert dollar
amount not greater than $1000).
e. ( ) No.
If loans are permitted, can a Participant have more than one loan outstanding at
the same time (check either f. or g.)? ------------------
f. ( ) Yes.
g. ( ) No.
20
<PAGE>
G2 PARTICIPANT INVESTMENT OF ACCOUNTS (Plan Section 7.4).
a. ( ) No, Participants are not permitted to direct the investment of
their Accounts.
b. ( ) Yes, Participants are permitted to direct the investment of their
Accounts, but only if they have attained age . (Indicate age or
N/A, if attainment of a certain age is not required.)
If YES, Participant direction extends to all Accounts except for the Accounts
checked below:
c. ( ) Elective Account.
d. ( ) Discretionary Non-Elective Account.
e. ( ) Fixed Non-Elective Account.
f. ( ) Qualified Non-Elective Account.
g. ( ) Matching Account.
h. ( ) Qualified Matching Account.
i. ( ) Rollover Account.
j. ( ) Voluntary Contribution Account.
k. ( ) Qualified Voluntary Employee Contribution Account.
l. ( ) Mandatory Contribution Account.
NOTE: INVESTMENT OF THE TRUST FUND IS RESTRICTED TO AAL MUTUAL FUNDS OR SUCH
OTHER INVESTMENTS PERMITTED BY AAL CAPITAL MANAGEMENT CORPORATION
(PLAN SECTION 7.2).
G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.5).
a. ( ) Yes, transfers from qualified plans (and rollovers) will be
allowed.
b. ( ) No, transfers from qualified plans (and rollovers) will not be
allowed.
If YES, withdrawals from a Participant's Rollover Account shall. . .
c. ( ) be permitted.
d. ( ) not be permitted.
21
<PAGE>
G4 HARDSHIP DISTRIBUTIONS (Plan Section 11.9).
a. ( ) Yes, hardship distributions are permitted.
b. ( ) No, hardship distributions are not permitted.
If YES, hardship distributions are permitted from (check c. or d.)...
c. ( ) Elective Accounts only.
d. ( ) All Accounts except for the Accounts checked below...
1. ( ) Discretionary Non-Elective Account.
2. ( ) Fixed Non-Elective Account.
3. ( ) Matching Accounts.
4. ( ) Elective Account.
5. ( ) Rollover Account.
Note: Hardship distributions from a Participant's Qualified Non-Elective
Account and Qualified Matching Account are not permitted. Hardship
distributions from a Participant's Elective Account are subject to the
provisions of Section 11.9.
G5 IN-SERVICE DISTRIBUTIONS (Plan Section 6.10).
a. In the case of a Participant's Elective Account, shall
distributions on or after the Participant's attainment of an
age no earlier than age 59 1/2 be permitted ?
1. ( ) Yes.
2. ( ) No.
If YES, what age must the Participant attain?
3. ( ) 591/2.
4. ( ) Other --------
b. In the case of a Participant's Accounts, other than his
Elective Account, shall in-service distributions be permitted?
1. ( ) Yes, in-service distributions are permitted.
2. ( ) Yes, in-service distributions are permitted, but only if
the Participant has attained age -------
3. ( ) Yes, in-service distributions are permitted, but only if
the Participant has completed ------- Years of Service
for Vesting purposes.
4. ( ) Yes, in-service distributions are permitted, but only if
the Participant has attained age ------ and has completed
------ Years of Service for Vesting purposes.
5. ( ) No, in-service distributions are not permitted.
If YES, indicate the Accounts of the Participant from which in-service
distributions will be permitted (check whichever is applicable).
6. ( ) Discretionary Non-Elective Account.
7. ( ) Fixed Non-Elective Account.
8. ( ) Matching Account.
9. ( ) Rollover Account.
22
<PAGE>
G6 EMPLOYEES' VOLUNTARY CONTRIBUTIONS (Plan Section 4.6)
a. ( ) Yes, voluntary contributions are permitted.
b. ( ) No, voluntary contributions are not permitted.
Note: Voluntary contributions are subject to strict discrimination rules.
An Employer who has ever maintained or who later adopts any plan in addition to
this Plan (including a welfare benefit fund, as defined in Code Section 419(e),
which provides post-retirement medical benefits allocated to separate accounts
for Key Employees, as defined in Code Section 419A(d)(3), or an individual
medical account, as defined in Code Section 415(1)(2)) (other than Paired Plans
#001, #002) may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under Code
Section 401. If the Employer who adopts or maintains multiple plans wishes to
obtain reliance that this Plan is qualified, application for a determination
letter should be made to the appropriate Key District Office.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under Code
Section 401 unless the terms of the Plan, as herein adopted or amended, that
pertain to the requirements of Code Sections 401(a)(4), 401(a)(17), 401(1),
401(a)(5), 410(b) and 414(s), as amended by the Tax Reform Act of 1986 or later
laws, (a) are made effective retroactively to the first day of the first Plan
Year beginning after December 31, 1988 (or such other date on which these
requirements first become effective with respect to this Plan); or (b) are made
effective no later than the first day on which the Employer is no longer
entitled, under regulations, to rely on a reasonable, good faith interpretation
of these requirements, and the prior provisions of the Plan constitute such an
interpretation.
This Adoption Agreement may be used only in conjunction with Basic Plan Document
#01. This Adoption Agreement and the Basic Plan Document shall together be known
as The AAL Mutual Funds Standardized 401(k) Profit Sharing Plan #003.
The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors.
AAL Capital Management Corporation will notify the Employer of any amendments
made to the Plan or of the discontinuance or abandonment of the Plan provided
this Plan has been acknowledged by AAL Capital Management Corporation or its
authorized representative. Furthermore, in order to be eligible to receive such
notification, we agree to notify AAL Captial Managment Corporation of any change
in address.
23
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on this ------- day of ------------, 19--. Furthermore, this Plan may
not be used unless acknowledged by AAL Capital Management Corporation or its
authorized representative.
EMPLOYER: TRUSTEE:
(enter name) (enter name)
By: By:
PARTICIPATING EMPLOYER:
(enter name)
By:
This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of AAL Capital Management Corporation has
acknowledged the use of the Plan. Such acknowledgment is for ministerial
purposes only. It acknowledges that the Employer is using the Plan but does not
represent that this Plan, including the choices selected on the Adoption
Agreement, has been reviewed by a representative of the sponsor or constitutes a
qualified retirement plan.
AAL Capital Management Corporation
By:
AAL Capital Management Corporation
222 W. College Avenue
Appleton, WI 54919
(414) 734-5721
24
Exhibit 24(b)(15)
Amended and Restated
Distribution Plan for
The AAL Mutual Funds
January 8, 1997
The AAL Mutual Funds Distribution Plan (the "Plan") as adopted by a vote of the
Board of Trustees and of the Qualified Trustees of the Trust on June 9, 1987, as
amended, is hereby further amended and restated, effective January 2, 1997, to
redescribe the shares originally detailed in the Plan as "Class A" shares and to
add "Class B" shares to the Plan as follows:
1. The Plan. This Plan is the written plan contemplated by Rule 12b-I (the
"Rule") under the Investment Company Act of 1940 (the "Act") of The AAL
Mutual Funds (the "Trust" or "Funds") for Class A and Class B shares of the
Funds, which are described in The AAL Mutual Funds' "Plan Pursuant to Rule
18f-3 under the Investment Company Act of 1940."
2. Definitions. As used in this Plan for Class A and Class B shares of the
Funds, the following terms shall have the following meanings:
(a) "Qualified Recipient" shall mean any broker-dealer or other "person"
(as that term is defined in the Act) which: (i) has entered into a
written agreement (a "related agreement") that complies with the Rule
with the Trust's Distributor; and (ii) has rendered distribution
assistance (whether direct, administrative or both) in the
distribution of the Trust's Class A and Class B shares.
(b) "Qualified Holdings" shall mean all Class A and Class B shares of the
Trust beneficially owned by: (i) a Qualified Recipient; (ii) the
customers (brokerage or other) of a Qualified Recipient; (iii) the
clients (investment advisory or other) of a Qualified Recipient- (iv)
the accounts as to which a Qualified Recipient has a fiduciary or
custodial relationship; and (v) the members of a Qualified Recipient,
if such Qualified Recipient is an association or union; provided that
the Qualified Recipient shall have been instrumental in the purchase
of such Class A and/or Class B shares by, or shall have provided
administrative assistance to, such customers, clients, accounts or
members in relation thereto. The Distributor may make final and
binding decisions as to all matters relating to Qualified Holdings and
Qualified Recipients, including but not limited to-. (i) the identity
of Qualified Recipients; (ii) whether or not any Class A and/or Class
B shares are to be considered as Qualified Holdings of any particular
Qualified Recipient; and (iii) what Class A and Class B shares, if
any, are to be attributed to a particular Qualified Recipient, to a
different Qualified Recipient or to no Qualified Recipient.
<PAGE>
(c) "Qualified Trustees" shall mean the Trustees of the Trust who are not
interested persons, as defined in the Act, of the Trust and who have
no direct or indirect financial interest in the operation of this Plan
or any agreement related to this Plan. While this Plan is in effect,
the selection and nomination of Qualified Trustees shall be committed
to the discretion of the Trustees who are not interested persons of
the Trust. Nothing herein shall prevent the involvement of others in
such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
(d) "Permitted Payments" shall mean payments by the Distributor to
Qualified Recipients as permitted by this Plan.
(e) "Permitted Expenses" shall mean expenses incurred by the Distributor
in connection with the distribution of shares of the Trust as defined
in the sections "Expenses Authorized" below on Class A and Class B
shares.
(f) Permitted Payments and Permitted Expenses shall not include any
expenses listed in the sections "Certain Other Payments Authorized"
below on Class A and Class B shares.
3. Payments Authorized.
Class A Shares
The Distributor is authorized, pursuant to this Plan, to make Permitted Payments
to any Qualified Recipient under a related agreement on either or both of the
following bases for Class A shares:
(a) as reimbursement for direct expenses incurred in the course of
distributing Trust Class A and Class B shares or providing
administrative assistance to the Trust or its shareholders, including,
but not limited to, advertising, printing and mailing promotional
material, (including commissions and other compensation paid to such
personnel); and/or
(b) at a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified
Holdings of such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any Qualified
Recipient, provided that: (i) that total amount of all Permitted Payments made
during a fiscal year of the Trust to all Qualified Recipients (whether made
under (a) and/or (b) above) do not exceed, in that fiscal year of the Trust, the
amounts for each Fund's Class A shares as set forth in Exhibit A, attached
hereto; and (ii) a majority of the
<PAGE>
Trust's Qualified Trustees may at any time decrease or limit the aggregate
amount of all Permitted Payments or decrease or limit the amount payable to any
Qualified Recipient for Class A shares. Each Fund will reimburse the Distributor
for such Permitted Payments for Class A shares within such limit, but the
Distributor shall bear any Permitted Payments beyond such limits.
Class B Shares
The Distributor is authorized, pursuant to this Plan, to make Permitted Payments
to any Qualified Recipient under a related agreement on either or both of the
following bases for Class B shares:
(a) as reimbursement for direct expenses incurred in the course of
distributing Trust shares or providing administrative assistance to
the Trust or its shareholders, including, but not limited to,
advertising, printing and mailing promotional material, (including
commissions and other compensation paid to such personnel); and/or
(b) at a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified
Holdings of such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any Qualified
Recipient, provided that: (i) that total amount of all Permitted Payments made
during a fiscal year of the Trust to all Qualified Recipients (whether made
under (a) and/or (b) above) do not exceed, in that fiscal year of the Trust, the
amounts for each Fund's Class B shares, if any, as set forth in Exhibit B,
attached hereto; and (ii) a majority of the Trust's Qualified Trustees may at
any time decrease or limit the aggregate amount of all Permitted Payments or
decrease or limit the amount payable to any Qualified Recipient for Class B
shares. Each Fund will reimburse the Distributor for such Permitted Payments for
Class B shares, if any, within such limit, but the Distributor shall bear any
Permitted Payments beyond such limits.
4. Expenses Authorized. The Distributor is authorized, pursuant to this Plan,
to purchase advertising for Class A and/or Class B shares of the trust, to
pay for sales literature and other promotional material, and to make
payments to sales personnel affiliated with it, in the form of commission
or other compensation.
Any such advertising and sales material may include references to other open end
investment companies or other investments and any salesmen so paid are not
required to devote their time solely to the sale of Trust Class A and/or Class B
shares. Any such expenses ("Permitted Expenses") made during a fiscal year of
any Fund shall be reimbursed or paid by the Fund, except that the combined
amount of reimbursement or payment of Permitted Expenses together with the
Permitted Payments made pursuant to Section 3 for Class A and/or Class B shares
of this Plan by a Fund shall not, in the
<PAGE>
aggregate, in that fiscal year of the Fund exceed the amounts for each Fund's
Class A and/or Class B shares as set forth in Exhibits A and B, attached hereto,
and the Distributor shall bear any such expenses beyond such limits. No such
reimbursement may be made for Permitted Expenses or Permitted Payments for
fiscal years prior to the fiscal year in question or in contemplation of future
Permitted Expenses or Permitted Payments.
5. Certain Other Payments Authorized. If and to the extent that any of the
payments by the Trust listed below are considered to be "primarily intended
to result in the sale of shares" issued by the Trust within the meaning of
the Rule, such payments by the Trust are authorized without limit under
this Plan and shall not be included in the limitations contained in this
Plan: (1) the costs of the preparation, printing and mailing of all
required reports and notices to shareholders, irrespective of whether such
reports or notices contain or are accompanied by material intended to
result in the sale of shares of the Trust or other funds or other
investments; (ii) the costs of preparing, printing and mailing of all
prospectuses to shareholders; (iii) the costs of preparing, printing and
mailing of any proxy statements and proxies, irrespective of whether any
such proxy statement includes any item relating to, or directed toward, the
sale of the Trust's shares; (iv) all legal and accounting fees relating to
the preparation of any such reports, prospectuses, proxies and proxy
statements; (v) all fees and expenses relating to the qualifications of the
Trust, the Funds and/or their shares under the securities or "Blue-Sky" law
of any jurisdiction; (vi) all fees under the Act and the Securities Act of
1933, including fees in connection with any application for exemption
relating to or directed toward the sale of the Trust's shares; (vii) all
fees and assessments of the Investment Company Institute or any successor
organization, irrespective of whether some of its activities are designed
to provide sales assistance; (viii) all costs of preparing and mailing
confirmations of shares sold or redeemed or share certificates, and reports
of share balances; and (ix) all costs of responding to telephone or mail
inquires of shareholders.
6. Investment Advisory Fees. It is recognized that the costs of distributing
Class A and Class B shares of the Trust are expected to exceed the sum of
Permitted Payments and Permitted Expenses ("Excess Distribution Costs") and
that the profits, if any, of the Trust's Advisor are dependent primarily on
the advisory fees paid by the Funds to the Advisor. If and to the extent
that any investment advisory fees paid by a Fund might, in view of any
Excess Distribution Costs, be considered as indirectly financing any
activity that is primarily intended to result in the sale of Class A and/or
Class B shares issued by the Trust or Fund, the payment of such fees is
authorized under this Plan. In taking any action contemplated by Section 15
of the Act as to any investment advisory contract to which the Trust or a
Fund is a party, the Trust's Board of Trustees, including its Trustees who
are not "interested persons," as defined in the Act, shall, in acting on
the terms of any such contract, apply the "fiduciary duty" standard
contained in Sections 36(a) and 36(b) of the Act.
<PAGE>
7. Reports. While this Plan is in effect for Class A and/or Class B shares,
the Distributor shall report in writing at least quarterly to the Trust's
Board of Trustees, and the Board shall review the following: (1) the
amounts of all Permitted Payments for Class A and Class B shares, the
identity of the recipients of each such Payment, the basis on which each
such recipient was chosen as a Qualified Recipient and the basis on which
the amount of the Permitted Payment to such Qualified Recipient was made;
(ii) the amounts of Permitted Expenses for Class A and Class B shares and
the purpose of each such Expense; and (iii) all costs of each item
specified in Section 5 of the Plan for Class A and Class B shares (making
estimates of such costs where necessary or desirable), in each case during
the preceding calendar or fiscal quarter.
8. Effectiveness, Continuation, Termination and Amendment.
Class A Shares. This Plan as applied to Class A shares has been approved: (i) by
a vote of the Board of Trustees of the Trust and of the Qualified Trustees, cast
in person at a meeting called for the purpose of voting on Class A shares of
this Plan; and (ii) by a vote of holders of at least a "majority" (as defined in
the Act) of the outstanding voting securities of each Fund for Class A shares.
This Plan, unless terminated as hereinafter provided, continues in effect from
year to year only so long as such continuance is specifically approved at least
annually by the Trust's Board of Trustees and its Qualified Trustees cast in
person at a meeting called for the purpose of voting on such continuance for
Class A shares. This Plan may be terminated at any time by a vote of a majority
of the Qualified Trustees or by the vote of the holders of a "majority" (as
defined in the Act) of the outstanding Class A shares of any Fund. This Plan may
not be amended to increase materially the amount of payments to be made for
Class A shares without shareholder approval, as set forth in (ii) above, and all
amendments must be approved in the manner set forth under (1) above. In the
event of termination of this Plan for Class A shares, the Distributor shall be
reimbursed only for Permitted Payments and Permitted Expenses for Class A shares
incurred to the date of termination and within the limit set forth in Section 4
above.
Class B Shares. This Plan as applied to Class B shares has been approved: (1) by
a vote of the Board of Trustees of the Trust and of the Qualified Trustees, cast
in person at a meeting called for the purpose of voting on Class B shares of
this Plan- and (ii) by a vote of holders of at least a "majority" (as defined in
the Act) of the outstanding voting securities of each Fund for Class B shares.
This Plan as applied to Class B shares shall, unless terminated as hereinafter
provided, continue in effect until January 2, 1998, and from year to year
thereafter only so long as such continuance is specifically approved at least
annually by the Trust's Board of Trustees and its Qualified Trustees cast in
person at a meeting called for the purpose of voting on such continuance for
Class B shares. This Plan as applied to Class B shares may be terminated at any
time by a vote of a majority of the Qualified Trustees or by the vote of the
holders of a "majority" (as defined in the Act) of the outstanding Class B
shares of any Fund. This Plan may not be amended to increase materially the
amount of payments to be made for Class B shares without shareholder approval,
as set forth in (ii) above, and all amendments must be approved in the manner
set forth under (1) above. In the event of
<PAGE>
termination of this Plan for Class B shares, the Distributor shall be reimbursed
only for Permitted Payments and Permitted Expenses for Class B shares incurred
to the date of termination and within the limit set forth in Section 4 above.
<PAGE>
EXHIBIT A
TO THE AAL MUTUAL FUNDS DISTRIBUTION PLAN
(Effective January 8, 1997)
CLASS A SHARES
1. The AAL Capital Growth Fund
Service Fee: 0.25 of 1 % of the average net assets
2. The AAL Bond Fund
Service Fee: 0.25 of 1 % of the average net assets
3. The AAL Municipal Bond Fund
Service Fee: 0.25 of 1 % of the average net assets
4. The AAL Money Market Fund
Service Fee: 0.125 of 1 % of the average net assets
5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001 12b-1
Distribution Fee: 0.10 of 1 % of the average net assets
6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006 12b-1
Distribution Fee: 0.10 of 1% of the average net assets
7. The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)
Service Fee: 0.25 of 1 % of the average net assets
8. The AAL Utilities Fund
Service Fee: 0.25 of 1 % of the average net assets
9. The AAL International Fund
Service Fee: 0.25 of 1 % of the average net assets
10. The AAL Small Cap Stock Fund
Service Fee: 0.25 of 1 % of the average net assets
11. The AAL High Yield Bond Fund
Service Fee: 0.25 of 1 % of the average net assets
<PAGE>
EXHIBIT B
TO THE AAL MUTUAL FUNDS DISTRIBUTION PLAN
(Effective January 8, 1997)
CLASS B SHARES
1. The AAL Capital Growth Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
2. The AAL Bond Fund
12b-1 Distribution Fee: 0.75 of 1% of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
3. The AAL Municipal Bond Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
4. The AAL Money Market Fund
12b-1 Distribution Fee: 0.75 of 1%, and Service Fee:
0.125 of 1 %
5. The AAL Mid Cap Stock Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1 % of the average net assets
6. The AAL Utilities Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
7. The AAL International Fund
12b-I Distribution Fee: 0.75 of 1% of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
8. The AAL Small Cap Stock Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
9. The AAL High Yield Bond Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1 % of the average net assets
<PAGE>
AMENDMENT NO.1
TO
THE AMENDED AND RESTATED DISTRIBUTION PLAN FOR
THE AAL MUTUAL FUNDS
The Amended and Restated Distribution Plan for The AAL Mutual Funds as adopted
by a vote of the Board of Trustees and that of the Qualified Trustees of the
Trust on January 8, 1997, is hereby amended, effective December 29, 1997, as
follows:
1. Exhibit A and Exhibit B to The AAL Mutual Funds Distribution Plan is
amended to add The AAL Balanced Fund and to change the name of The AAL
Utilities Fund to The AAL Equity Income Fund.
<PAGE>
EXHIBIT A
TO THE AAL MUTUAL FUNDS DISTRIBUTION PLAN
(Effective January 8, 1997)
CLASS A SHARES
1 The AAL Capital Growth Fund
Service Fee: 0.25 of 1 % of the average net assets
2. The AAL Bond Fund
Service Fee: 0.25 of 1 % of the average net assets
3. The AAL Municipal Bond Fund
Service Fee: 0.25 of 1 % of the average net assets
4. The AAL Money Market Fund
Service Fee: 0.125 of 1 % of the average net assets
5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001
12b-1 Distribution Fee: 0.10 of 1 % of the average net assets
6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006
12b-1 Distribution Fee: 0.10 of 1% of the average net assets
7. The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)
Service Fee: 0.25 of 1 % of the average net assets
8. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)
Service Fee: 0.25 of 1 % of the average net assets
9. The AAL International Fund
Service Fee: 0.25 of 1 % of the average net assets
10. The AAL Small Cap Stock Fund
Service Fee: 0.25 of 1 % of the average net assets
11. The AAL High Yield Bond Fund
Service Fee: 0.25 of 1% of the average net assets
12. The AAL Balanced Fund
Service Fee: 0.25 of 1% of the average net assets
<PAGE>
EXHIBIT B
TO THE AAL MUTUAL FUNDS DISTRIBUTION PLAN
(Effective January 8, 1997)
CLASS B SHARES
1. The AAL Capital Growth Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
2. The AAL Bond Fund
12b-1 Distribution Fee: 0.75 of 1% of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
3. The AAL Municipal Bond Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and Service
Fee:
0.25 of 1 % of the average net assets
4. The AAL Money Market Fund
12b-1 Distribution Fee: 0.75 of 1%, and
Service Fee: 0.125 of 1 %
5. The AAL Mid Cap Stock Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1 % of the average net assets
6. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
7. The AAL International Fund
12b-1 Distribution Fee: 0.75 of I% of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
8. The AAL Small Cap Stock Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
9. The AAL High Yield Bond Fund
12b-1 Distribution Fee: 0.75 of 1 % of the average net assets, and
Service Fee: 0.25 of 1 % of the average net assets
10. The AAL Balanced Fund
12b-1 Distribution Fee: 0.75 of 1% if the average net assets, and
Service Fee: 0.25 of 1% of the average net assets
EXHIBIT 24(b)(16)
Schedules for Computations of Performance for The AAL
Balanced Fund, A and B shares
The AAL Balanced Fund Class A
4/30/98
(Assuming Reinvestment of all dividends)
<TABLE>
<CAPTION>
Last 12 Months
Dividends Ending Ending Ending Ending
Date NAV POP Per Share Shares Dollars Shares Dollars
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31-Dec-97 10.00 10.42 95.969 959.69 95.969 959.69
30-Jan-98 10.06 10.48 95.969 965.45 95.969 965.45
27-Feb-98 10.51 10.95 95.969 1,008.64 95.969 1,008.64
31-Mar-98 10.74 11.19 0.027 96.211 1,033.30 96.211 1,033.30
30-Apr-98 10.81 11.26 96.211 1,040.04 96.211 1,040.04
</TABLE>
<TABLE>
<CAPTION>
Total Return Based on Gross Amount Invested Total Return Based on Net Amount Invested
n = 3.041667
- ----------------------------------------------- ---------------------------------------------------------------------
<S> <C> <C> <C>
Annualized From Inception 12.682% Annualized From Inception 27.705%
------- -------
For Last 12 Months 4.004% For Last 12 Months 8.372%
------ ------
Calender Year 1998 4.004% Calender Year 1998 8.372%
------ ------
Gross Return From Inception 4.004% Gross Return From Inception 8.372%
------ ------
- ----------------------------------------------- ---------------------------------------------------------------------
</TABLE>
12 month
dividend 0.027 4.47%
distributions
Cumulative distributions
0.027
The AAL Balanced Fund Class B
4/30/98
(Assuming Reinvestment of all dividends)
<TABLE>
<CAPTION>
Last 12 Months
Dividends Ending Ending Ending Ending
Date NAV Per Share Shares Dollars Shares Dollars
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
31-Dec-97 10.00 100.000 1,000.00 100.000 1,000.00
30-Jan-98 10.05 100.000 1,005.00 100.000 1,005.00
27-Feb-98 10.49 100.000 1,049.00 100.000 1,049.00
31-Mar-98 10.72 0.02 100.1866 1,074.00 100.187 1,074.00
30-Apr-98 10.79 100.1866 1,081.01 100.187 1,081.01
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Total Return Based on Gross Amount Invested Total Return Based on Net Amount Invested
n = 3.041667
</TABLE>
- ----------------------------------------------------------
Net CDSC
Annualized From inception 26.737% 9.735%
------- ------
(12/31/97)
For Last 12 Months 8.101% 3.101%
------ ------
For Calendar Year 1998 8.101% 3.101%
------ ------
- ----------------------------------------------------------
12 month dividend distributions
0.02
Cumulative distributions
0.02
Exhibit 24(b)(18)
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3 UNDER THE
INVESTMENT COMPANY ACT OF 1940
DECEMBER 29, 1997
Whereas, the Board of Trustees of The AAL Mutual Funds (the "Trust") have
considered the addition of Institutional shares to the multi-class plan
("Plan"), under which the Trust may offer multiple classes of shares pursuant to
Rule 18f-3 under the Investment Company Act of 1940, (the "40 Act") as adopted
by a vote of the Board of Trustees of the Trust, effective January 8, 1997; and
Whereas, a majority of Trustees of the Trust and a majority of the Trustees who
are not interested persons of the Trust have found the Plan, as amended, to be
in the best interest of the shareholders of each class of the Trust, as well as
the Trust itself;
Therefore, the Trust hereby approves and adopts the addition of Institutional
shares to the Plan as set forth below pursuant to Rule 18f-3 of the 40 Act.
The Plan
All current and future series ("Funds") of the Trust may, from time to time,
issue one or more of the following classes of shares:
Class A shares
Class B shares
Institutional shares
Each class is subject to such investment minimums and other conditions as set
forth in the Trust's prospectuses as from time to time is in effect. Differences
in expenses among classes, the conversion from one class to another class, and
exchange features are subject to the terms and conditions of this plan.
Initial Sales Charge
Class A share of the Funds are offered at a public offering price that is equal
to their net asset value ("NAV") plus a sales charge of up to 4.00% of the
public offering price (with a lesser sales charge on certain series as described
in the prospectus). The maximum sales charges on Class A shares may be reduced
or waived as permitted under Rule 22d-1 of the 40 Act and described in the
prospectus. For example, sales charges may be reduced or eliminated for
investments at various levels (breakpoints) as well as for Lutheran
organizations, and employees of the adviser and sub-adviser. Class B Shares have
no initial sales charge and no sales charge is imposed when B Shares are
automatically converted to A Shares. Institutional shares have no initial sales
charge and are not convertible into Class A or Class B shares.
<PAGE>
Contingent Deferred Sales Charge
A Contingent Deferred Sales Charge ("CDSC") is imposed on Class B Shares under
certain circumstances. The Trust imposes a CDSC is the investor redeems shares
that have been owned less than 5 years according to the following schedule:
Holding Period of: Percentage CDSC
1 Year or Less 5%
More than 1 Year but Less than 2 Years 4%
2 Years but Less than 3 Years 3%
3 Years but Less than 4 Years 2%
4 Years but Less than 5 Years 1%
5 Years or more Converted to A Shares
The amount of the CDSC is based upon the lesser of NAV at the time of redemption
or purchase and is gradually reduced over a period of up to 5 years. Consistent
with the requirements of Rule 6c-10 of the 40 Act, the CDSC will not be imposed
under certain circumstances as described in the prospectus. For example, the
CDSC will not be imposed on shares acquired by dividend or capital gain or upon
certain redemptions from retirement plans. In determing whether an amount is
available for redemption without a CDSC as well as computing the amount of the
CDSC, it is assumed that shares acquired by reinvesting dividends and capital
gains are redeemed first, then shares are redeemed in the order purchased to
minimize the amount of CDSC collected.
Both Class A and Class B Shares are aggregated for purposes of Rights of
Accumulation and Letters of Intent as described in the prospectus for Class A
and Class B shares of the Funds.
No Sales Charge
Institutional shares of the Funds are offered at net asset value to Lutheran
organizations or institutions with a minimum initial investment in the Funds of
$500,000. Institutional shares are not subject to an initial sales charge or a
CDSC. Institutional shares are not convertible to Class A or Class B shares.
Separate Arrangements and Expense Allocations of Each Class
Class A, Class B and Institutional shares pay the expenses associated with their
different distribution and servicing arrangements. Each class may, at the
Trustees; discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the management
of the Trust's assets, if these expenses are actually incurred in a different
amount by that class, or if the class receives services of a different kind or
to a different degree than the other class. All other expenses will be allocated
to each class on the basis of the net asset value of the particular Fund.
However, the Trust's Money Market Fund operates pursuant to Rule 2a-7 of the 40
Act and makes daily distributions of its net investment income. This Fund may
allocate such other expenses to each share regardless of class, or based on
relative net assets, (i.e., settled shares), as permitted by Rule 18f-3 under
the 40 Act.
Class A, Class B and Institutional shares pay fees for services rendered and
borne in connection with personal services rendered to shareholders of their
respective class and the maintenance of shareholder accounts. In addition, Class
A and Class B shares pay a service fee at an annual rate of .25% of net assets
computed on a daily basis and Class B Shares pay a separate Rule 12b-1
distribution fee at an annual rate of .75% of net assets computed on a daily
basis, as described in the prospectus. Institutional shares neither pay service
fees nor separate Rule 12b-1 distribution fees.
Conversion Features
Class B Shares of each Fund automatically convert to Class A shares of the same
Fund after they have been held for 5 years and thereafter are subject to the
lower fees charged to Class A Shares In this regard, if there are any material
changes in payments authorized under the Rule 12b-1 Plan ("Distribution Plan")
applicable to Class A Shares without the approval of the Class B shareholders,
the Trust will establish a new class of shares into which Class B Shares would
convert, on the same terms as those applied to Class A Shares before such
increase.
Institutional shares do not convert to Class A or Class B shares.
Exchange Features
A shareholder may exchange Class A, Class B and Institutional share of any Fund
for the same class of shares, with identical registration, at net asset value
(except for exchanges involving unprivileged Money Market Fund Class A Shares
for other Class A Shares).
If less than all of a Class B share investment is exchanged, any portion of the
investment attributable to dividends, capital gains and or capital appreciation
will be exchanged first and thereafter, any portions exchanged will be in the
order purchased, from first to last.
Dividends/Distributions
Each Fund pays out as dividends substantially all of its net investment income
(which comes from dividends and interest it receives from its investments) and
net realized short term capital gains. All dividends and distributions will be
paid in the form of additional shares of the series and class of shares that
generated the dividend or distribution if the shareholder has elected another
option. Dividends paid by each Fund with respect to each class are calculated in
the same manner and at the same time.
<PAGE>
Voting Rights
Each share of a Fund entitles the shareholder of record to one vote. Each Fund
votes separately on matters relating solely to that Fund. Each class shall have
exclusive voting rights on any matter that solely affects such class, and shall
have separate voting rights on any matter submitted to shareholders in which
class interests differ. All shareholders will have equal voting rights on any
matter that affects all shareholders equally. Because of the automatic
conversion, Class B Shareholders may be asked to vote separately on any material
increase in payments for Class A shares under the Distribution Plan.
The Plan is subject to amendment as permitted by the Trust's Articles and
Bylaws, as well as applicable law, and shall be construed to comply with Rule
18f-3 of the 40 Act.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811869
<NAME> THE AAL MUTUAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> THE AAL SMALL CAP STOCK FUND CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 118268936
<INVESTMENTS-AT-VALUE> 135331035
<RECEIVABLES> 635020
<ASSETS-OTHER> 282128
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 136248183
<PAYABLE-FOR-SECURITIES> 969531
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 185983
<TOTAL-LIABILITIES> 1155514
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114599301
<SHARES-COMMON-STOCK> 8689794
<SHARES-COMMON-PRIOR> 4520022
<ACCUMULATED-NII-CURRENT> 9359
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3421910
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17062099
<NET-ASSETS> 120285342
<DIVIDEND-INCOME> 414834
<INTEREST-INCOME> 193471
<OTHER-INCOME> 0
<EXPENSES-NET> 1646285
<NET-INVESTMENT-INCOME> (1037980)
<REALIZED-GAINS-CURRENT> 9736718
<APPREC-INCREASE-CURRENT> 20348718
<NET-CHANGE-FROM-OPS> 29047456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4330010)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4581398
<NUMBER-OF-SHARES-REDEEMED> (770817)
<SHARES-REINVESTED> 359191
<NET-CHANGE-IN-ASSETS> 87210458
<ACCUMULATED-NII-PRIOR> 4720
<ACCUMULATED-GAINS-PRIOR> (628403)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 690590
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1646285
<AVERAGE-NET-ASSETS> 83488720
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> (.101)
<PER-SHARE-GAIN-APPREC> 4.726
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.625)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.84
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811869
<NAME> THE AAL MUTUAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> THE AAL SMALL CAP FUND CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 118268936
<INVESTMENTS-AT-VALUE> 135331035
<RECEIVABLES> 635020
<ASSETS-OTHER> 282128
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 136248183
<PAYABLE-FOR-SECURITIES> 969531
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 185983
<TOTAL-LIABILITIES> 1155514
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114599301
<SHARES-COMMON-STOCK> 1047930
<SHARES-COMMON-PRIOR> 345827
<ACCUMULATED-NII-CURRENT> 9359
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3421910
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17062099
<NET-ASSETS> 14389944
<DIVIDEND-INCOME> 414834
<INTEREST-INCOME> 193471
<OTHER-INCOME> 0
<EXPENSES-NET> 1646285
<NET-INVESTMENT-INCOME> (1037980)
<REALIZED-GAINS-CURRENT> 9736718
<APPREC-INCREASE-CURRENT> 20348718
<NET-CHANGE-FROM-OPS> 29047456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (429281)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 707744
<NUMBER-OF-SHARES-REDEEMED> (41520)
<SHARES-REINVESTED> 35879
<NET-CHANGE-IN-ASSETS> 87210458
<ACCUMULATED-NII-PRIOR> 4720
<ACCUMULATED-GAINS-PRIOR> (628403)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 690590
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1646285
<AVERAGE-NET-ASSETS> 8563594
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> (.158)
<PER-SHARE-GAIN-APPREC> 4.667
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.589)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.73
<EXPENSE-RATIO> 2.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000811869
<NAME> THE AAL MUTUAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> THE AAL MID CAP STOCK FUND CLASS A
<MULTIPLIER> 1
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