<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. N/A)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AAL VARIABLE PRODUCT SERIES FUND, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(1):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
- ------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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- --------------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[AAL VARIABLE PRODUCT SERIES FUND, INC. LETTERHEAD]
March 15, 1996
Re: SPECIAL MEETING OF SHAREHOLDERS
Dear Certificate Owner:
Enclosed is a notice of a Special Meeting of Shareholders of each series of
AAL Variable Product Series Fund, Inc. (together the "Portfolios"), to be held
on April 24, 1996, together with a proxy statement and form of proxy relating
to the business to be transacted at the meeting.
This Special Meeting of Shareholders is necessary to extend the present
Investment Advisory Agreement for the Portfolios with Aid Association for
Lutherans ("AAL") which otherwise will terminate by its terms on September 27,
1996. As a Certificate Owner, you are entitled to vote on this matter. The
Board of Directors has determined that it is in the best interests of the
Certificate Owners to amend the Investment Advisory Agreement so as to extend
its term and to provide for its annual renewal thereafter, so long as such
annual renewal is specifically approved in a manner consistent with the
Investment Company Act of 1940 and the AAL Variable Product Series Fund, Inc.'s
current Prospectus, dated January 3, 1995, relating to the Portfolios. No
other business is scheduled to be transacted.
If you have any questions or concerns that you would like to discuss about
the meeting and the matter to be acted upon, please call us at 800-405-6140.
Thank you for your continued confidence in AAL. Your cooperation and
participation in completing and returning the enclosed proxy will ensure that
your vote is counted.
AAL VARIABLE PRODUCT SERIES
FUND, INC.
/s/ D. Charles DeVries
D. Charles DeVries, President
<PAGE> 3
AAL VARIABLE PRODUCT SERIES FUND, INC.
4321 NORTH BALLARD ROAD
APPLETON, WISCONSIN 54919
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 24, 1996
A Special Meeting of the Shareholders of AAL Variable Product Series Fund,
Inc. (the "Fund"), including AAL Variable Product Large Company Stock
Portfolio, AAL Variable Product Small Company Stock Portfolio, AAL Variable
Product Bond Portfolio, AAL Variable Product Balanced Portfolio and AAL
Variable Product Money Market Portfolio (together the "Portfolios"), will be
held at 4321 North Ballard Road, Appleton, Wisconsin 54919, on April 24, 1996,
beginning at 10:00 a.m. local time for the following purpose(s):
1. To approve an amendment to the present Investment Advisory Agreement
between the Fund and Aid Association for Lutherans ("AAL") so as to
extend the initial two-year term and to provide for annual renewals
thereafter. A copy of the proposed First Amendment to Advisory
Agreement and of the Investment Advisory Agreement is attached as
Appendix A to the accompanying Proxy Statement.
2. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting, and the discretion of the
proxies or their substitutes.
The Board of Directors has fixed the close of business on Friday, March 8,
1996 as the record date ("Record Date") for determining shareholders entitled
to notice of, and shares having voting rights in connection with, the Special
Meeting and any adjournment thereof. Your attention is invited to the Proxy
Statement accompanying this Notice for a more complete statement regarding the
matters to be acted upon at the Special Meeting.
Each Portfolio issues and sells its shares to AAL Variable Annuity Account
I (the "Variable Account"), where the shares are held to fund benefits under
variable annuity certificates issued by the Variable Account (the
"Certificates"). As the owner of all of the assets held in the Variable
Account, AAL is the sole shareholder of each Portfolio and is entitled to vote
all of the shares of each Portfolio held in the Variable Account. However,
pursuant to applicable laws, the Fund's current Prospectus dated January 3,
1995 and the Fund's Articles of Incorporation and Bylaws, AAL votes outstanding
shares of the Portfolios in accordance with instructions received from the
owners of the Certificates ("Certificate Owners") issued in the Variable
Account. This Notice is being delivered to Certificate Owners who, by virtue
of their ownership of Certificate(s), owned beneficially shares of
<PAGE> 4
one or more of the Portfolios as of the Record Date, so that they may instruct
AAL on how the Portfolio shares underlying their Certificates should be voted
on matters to be acted upon at the Special Meeting.
By Order of the Board of Directors of
AAL Variable Product Series Fund,
Inc.
/s/ Mark J. Mahoney
Mark J. Mahoney, Secretary
Appleton, Wisconsin
March 15, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED FORM(S) OF
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE PROVIDED FOR
THAT PURPOSE.
<PAGE> 5
PROXY STATEMENT
AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL VARIABLE PRODUCT LARGE COMPANY STOCK PORTFOLIO
AAL VARIABLE PRODUCT SMALL COMPANY STOCK PORTFOLIO
AAL VARIABLE PRODUCT BOND PORTFOLIO
AAL VARIABLE PRODUCT BALANCED PORTFOLIO
AAL VARIABLE PRODUCT MONEY MARKET PORTFOLIO
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Phone: 1-800-405-6140
================
This Proxy Statement was first mailed to
Shareholders on or about March 18, 1996
================
SOLICITATION, PURPOSE AND VOTING
SOLICITATION
The enclosed Proxy is being solicited by the Board of Directors of AAL
Variable Product Series Fund, Inc. (the "Fund") in connection with the joint
Special Meeting of Shareholders of each of the Portfolios listed above (the
"Portfolios") to be held on April 24, 1996 (the "Special Meeting"). Each
Portfolio issues and sells its shares to AAL Variable Annuity Account I (the
"Variable Account"), where the shares are held to fund benefits under variable
annuity certificates issued by the Variable Account (the "Certificates"). As
the owner of all of the assets held in the Variable Account, AAL is the sole
shareholder of each Portfolio and is entitled to vote all of the shares of each
Portfolio held in the Variable Account. However, pursuant to applicable laws
and the Fund's current Prospectus dated January 3, 1995, AAL votes outstanding
shares of the Portfolios in accordance with instructions received from the
owners of the Certificates ("Certificate Owners") issued in the Variable
Account. This Proxy Statement and the accompanying Notice and Form of Proxy
are being delivered to Certificate Owners who, by virtue of their ownership of
Certificate(s), beneficially owned shares of one or more of the Portfolios as
of Friday, March 8, 1996 (the "Record Date"), so that they may instruct AAL on
how the Portfolio shares underlying their Certificates should be voted on
matters to be acted upon at the Special Meeting.
You are encouraged to read carefully this proxy statement and mark and
return the form(s) of proxy accompanying it.
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<PAGE> 6
PURPOSE
The purpose of the Special Meeting is to approve an amendment to the
current Investment Advisory Agreement, dated September 27, 1994 (the "Advisory
Agreement"), between the Fund and Aid Association for Lutherans ("AAL"). The
Advisory Agreement by its terms will terminate automatically on September 27,
1996. The Board of Directors has determined that it would be in the best
interests of the Certificate Owners to amend the Agreement so as to extend its
term and thereafter to continue in effect from year to year, so long as such
continuance is specifically approved at least annually in the manner required
under the Investment Company Act of 1940, as amended (the "1940 Act"). No other
terms or conditions of the Advisory Agreement would be affected.
QUORUM AND VOTING
The representation at the meeting, in person or by proxy, of shares
constituting one-third of all shares outstanding and entitled to vote on a
matter constitutes a quorum for the transaction of business. Abstentions will
be treated as present for purposes of determining the presence or absence of a
quorum.
Each of the Portfolios will vote separately for approval or disapproval
of the proposed amendment. In order to be approved as to any Portfolio, the
proposed amendment to the Advisory Agreement must be approved by a majority of
the outstanding shares of that Portfolio. A majority of the outstanding shares
means the approval of the lesser of: (i) 67% or more of the shares represented
at a meeting at which more than 50% of all of the shares of the Portfolio
entitled to vote are present or represented by proxy; or (ii) more than 50% of
all of the shares of the Portfolio entitled to vote. Accordingly, abstentions
will have the same effect as votes cast against approval of the proposed
amendment to the Advisory Agreement.
AAL, as the sole shareholder of each Portfolio of the Fund, will submit a
proxy for all shares of each Portfolio owned of record by it as of the record
date. Shares underlying Certificates with respect to which AAL has received
voting instructions from the Certificate Owner will be voted by AAL in
accordance with such instructions. Shares with respect to which an executed
proxy is received, but provides no voting instructions, will be voted by AAL in
favor of the proposed amendment. For purposes of calculating AAL's
proportionate voting described below, such uninstructed shares will be counted
the same as shares with respect to which AAL has received instructions to vote
in favor of the proposed amendment. Shares with respect to which no proxy is
received, together with shares owned by AAL which are not represented by
outstanding Certificate(s), will be voted by AAL in proportion to the shares
with respect to which AAL has received instructions from Certificate Owners.
By way of example, suppose there were outstanding a total of 1,000 shares
of a Portfolio. Suppose further that Certificate Owners owning Certificates
representing 680 of those shares returned proxies instructing AAL as follows:
(a) to vote 340 shares "FOR" approval of the proposed amendment to the Advisory
Agreement; (b) to vote 170 shares "AGAINST" approval; (c) to abstain from
voting 85 shares; and (d) providing no voting instruction with respect to
the remaining 85 shares. Then AAL would vote the 595 shares referred to in
clauses (a), (b) and (c) as instructed, and would vote the remaining 85 shares
referred to in clause (d) "FOR" approval of the proposed amendment. In
addition, of the 320 shares with respect to which no proxies were received, AAL
would vote 200 shares "FOR" approval (which is proportionate to the sum of the
shares referred to in clauses (a) and (d) above, divided by the total number of
shares with respect to which executed proxies were received), would vote 80
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<PAGE> 7
shares "AGAINST" approval, and would abstain from voting the remaining 40
shares.
The number of votes with respect to which a Certificate Owner has the
right to instruct AAL on voting is calculated separately for each subaccount.
The number of votes that each Certificate Owner may instruct is determined by
dividing a Certificate's accumulated value in a subaccount as of the Record
Date by the net asset value per share of the corresponding Portfolio in which
the subaccount invests as of the Record Date. Fractional shares are counted.
Shares represented by properly executed proxies received by the Fund
will be voted by AAL at the Special Meeting and any adjournment thereof in
accordance with the terms of such proxies, as described above. A Certificate
Owner may revoke his or her proxy at any time prior to the voting thereof by
filing a written notice of revocation with the Secretary of the Fund prior to
the Special Meeting or by delivering a duly executed proxy bearing a later
date.
Certificate Owners owning Certificates representing shares at the close of
business on March 8, 1996 will be entitled to one vote on each matter presented
for each share so represented. At that date, there were 19,637,047.642 shares
of the Fund outstanding, including 2,776,245.383 shares of AAL Variable
Product Large Company Stock Portfolio, 1,990,769.823 shares of AAL Variable
Product Small Company Stock Portfolio, 1,127,061.638 shares of AAL Variable
Product Bond Portfolio, 3,767,655.418 shares of AAL Variable Product Balanced
Portfolio and 9,975,295.380 shares of AAL Variable Product Money Market
Portfolio.
UPON REQUEST AND AT NO COST TO A REQUESTING CERTIFICATE OWNER, THE FUND
WILL MAIL, BY FIRST CLASS MAIL, COPIES OF ITS ANNUAL REPORT TO SHAREHOLDERS FOR
THE YEAR ENDED DECEMBER 31, 1995. REQUESTS SHOULD BE DIRECTED TO THE ATTENTION
OF THE AAL VARIABLE ANNUITY SERVICE CENTER, 4321 NORTH BALLARD ROAD, APPLETON,
WISCONSIN 54919-0001, TELEPHONE: 1-800-405-6140.
APPROVAL OF AMENDMENT TO ADVISORY AGREEMENT
BACKGROUND
The Special Meeting has been called for the purpose of considering the
approval of an amendment to the Advisory Agreement for the Portfolios. The
Advisory Agreement, by its terms, automatically will expire on September 27,
1996. The Board of Directors has determined that it is in the best interests
of the Certificate Owners to amend the Advisory Agreement before it expires, so
as to extend its term and provide for continuation thereafter from year to
year, but only for so long as such continuance is specifically approved
annually in the manner required under the 1940 Act. A copy of the proposed
amendment and the
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<PAGE> 8
Advisory Agreement is included as Appendix A attached to this Proxy Statement.
The summary of the provisions of such amendment and Advisory Agreement set
forth herein is qualified in its entirety by reference to the complete text of
those documents.
DESCRIPTION OF PRESENT ADVISORY AGREEMENT
AAL (sometimes referred to as the "Adviser") is the investment adviser to
the Fund. AAL was organized on November 24, 1902. The Adviser is a fraternal
benefit society under Internal Revenue Code Section 501(c)(8) and is
incorporated under the laws of the state of Wisconsin. AAL has approximately
1.68 million members and is the world's largest fraternal benefit society in
terms of assets (over $15.4 billion as of December 31, 1995) and life insurance
in force (over $75.6 billion as of December 31, 1995), ranking it in the top
two percent of all life insurers in the United States in terms of ordinary life
insurance in force. Membership is open to Lutherans and their families. AAL
offers life, disability income insurance and annuities to its members. All
members are part of one of over 9,100 local AAL branches throughout the United
States. Although, prior to engagement as the Adviser to the Fund, AAL had not
served as an investment adviser to a mutual fund, AAL has extensive experience
in investment management matters and staff professionals associated with the
Adviser have previous experience in the management of financial assets. AAL
manages assets in excess of $14 billion for its insurance portfolios. The
principal address of the Adviser is 4321 North Ballard Road, Appleton,
Wisconsin 54919.
Under the Advisory Agreement, the Adviser manages the investment and
reinvestment of the Fund's assets, provides the Fund with office space,
executive and other personnel, facilities and administrative services, and
supervises the Fund's daily business affairs, all subject to the supervision of
the Fund's Board of Directors. The Adviser formulates and implements a
continuous investment program for the Portfolios consistent with each
Portfolio's investment objectives, policies and restrictions.
For its services, the Adviser receives an investment advisory fee as
compensation for its services to the Fund, computed separately for each
Portfolio. The fee is a daily charge equal to an annual rate of .35% of the
average daily net assets of each Portfolio up to $250,000,000 and .30% of the
average daily net assets of each Portfolio in excess of that amount. For the
fiscal year ended December 31, 1995, the Adviser received fees under the
Advisory Agreement with respect to each of the Portfolios as follows: The AAL
Variable Product Large Company Stock Portfolio $26,916; The AAL Variable
Product Small Company Stock Portfolio $17,641; The AAL Variable Product Bond
Portfolio $12,744; The AAL Variable Balanced Portfolio $35,948; and The AAL
Variable Product Money Market Portfolio $8,720.
-4-
<PAGE> 9
AAL has agreed to reimburse the Fund for substantially all of its
operating expenses, other than investment advisory fees, brokerage commissions,
and any extraordinary items such as litigation expenses or income tax
liabilities. AAL may withdraw this undertaking on 30 days' written notice to
the Fund.
The present Advisory Agreement was initially approved by the Board of
Directors of the Fund on September 27, 1994, and was approved by AAL, as the
Fund's initial shareholder. Unless earlier terminated as described below, the
Advisory Agreement provides that it will remain in effect for a period of not
more than two years from the effective date with respect to any of the
Portfolios (or not later than September 27, 1996), and only so long as such
continuance is specifically approved at least annually in the manner required
under the 1940 Act. Under the 1940 Act, the requisite approval will be deemed
to have been obtained only if the present Advisory Agreement is specifically
approved at least annually: (i) by the vote of a majority of the Directors who
are not parties to the present Advisory Agreement or "interested persons" (as
defined in the 1940 Act) of any such party cast in person at a meeting called
for the purpose of voting on such approval; and (ii) either by the vote of a
majority of the entire Board of Directors or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the outstanding voting securities of
the particular Portfolio.
The Advisory Agreement may be terminated by the Adviser, in its
entirety, at any time without penalty upon giving the Fund 60 days' written
notice, and may be terminated by the Fund, either in its entirety or with
respect to any specified Portfolio(s), at any time without penalty upon giving
the Adviser 60 days' written notice, provided that such termination by the Fund
must be directed or approved by the vote of a majority of all of its Directors
in office at the time or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the voting securities of each of the affected Portfolio(s).
In addition, the present Advisory Agreement automatically terminates in the
event of its "assignment" (as defined in the 1940 Act). If the present
Advisory Agreement is terminated, the approval of the shareholders of each
Portfolio voting separately is required to enter into a new agreement with
respect to such Portfolio.
PROPOSED AMENDMENT TO ADVISORY AGREEMENT
The proposed amendment to the Advisory Agreement would change the present
Advisory Agreement only with respect to its term. The proposed amendment would
extend the term of the Advisory Agreement and would provide for its continuance
from year-to-year thereafter, but only so long as such continuance is
specifically approved annually in the manner required under the 1940 Act.
Without this amendment, the present Advisory Agreement will terminate
automatically on September 27, 1996.
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<PAGE> 10
In considering approval of the proposed amendment to the Advisory
Agreement, the Board of Directors considered, among other factors, the
background and experience of the Adviser, its management personnel and the
portfolio managers, the quality of the services provided, the performance of
the Portfolios, and the fees charged by the Adviser. The Board of Directors
noted that, through December 31, 1995, the Portfolios have performed
satisfactorily in light of their respective investment objectives. In
assessing the rate of the advisory fees, the Board of Directors also considered
the Adviser's expense reimbursement under the Advisory Agreement. See
"Approval of Amendment to Advisory Agreement - Description of Present Advisory
Agreement." In particular, the Board of Directors noted that, pursuant to the
Adviser's expense reimbursement provision, it reimbursed to the Fund all of the
Fund's operating expenses incurred through the period ended December 31, 1995,
except for the advisory fee and brokerage commissions. The Board of Directors
observed that the Adviser has obtained for the Fund brokerage execution with
respect to transactions in portfolio securities at an average rate of $.04 per
share, which the Board of Directors views as a competitive rate given the
relatively small size of the Fund's portfolio securities trades. The Board of
Directors believes the Adviser has provided high quality services at very
favorable overall prices, and therefore approved the proposed amendment and
unanimously recommends its approval at the Special Meeting.
In order to be approved as to any Portfolio, the proposed amendment to the
Advisory Agreement must receive the affirmative vote of at least a majority of
the outstanding shares of that Portfolio, or if less, 67% of the shares
represented at a meeting of shareholders at which the holders of 50% or more of
the outstanding shares of that Portfolio are present or represented by proxy.
MANAGERIAL PERSONNEL
The names, addresses and principal occupations of the principal
executive officer and the Directors of the Adviser are:
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH AAL
---------------- ---------------------
Richard L. Gunderson Chief Executive Officer
4321 North Ballard Road and Chairman of the
Appleton, WI 54919 Board
John O. Gilbert President, Chief
4321 North Ballard Road Operating Officer and
Appleton, WI 54919 Director
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<PAGE> 11
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH AAL
---------------- --------
<S> <C>
Herbert J. Arkebauer Director
Professor
Speech and Hearing Science
Southwest State University
Springfield, MO
Raymond G. Avischious Director
formerly President & General Manager
Shurfine-Central
4200 Oaksbury Lane
Rolling Meadows, IL 60008
Richard E. Beumer Director
President
Sverdrup Corporation
13723 Riverport Drive
Maryland Heights, MO 63043
Kenneth Daly Director
Partner
KPMG Peat Marwick
1600 Market Street
Philadelphia, PA 19103-7201
Elizabeth A. Duda Director
2450 Mikler Road
Oviedo, FL 32765
Edward A. Engel Director
President
Edward A. Engel & Associates
P.O. Box 2039
Birmingham, MI 48012
Gary J. Greenfield Director
President
Wisconsin Lutheran College
8830 West Bluemound Road
Milwaukee, WI 53226
James W. Hanson Director
formerly Chief Economist
Exxon Corporation New York
505 High Point Drive
Mount Dora, FL 32757
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH AAL
---------------- --------
<S> <C>
Robert H. Hoffman Director
Vice President
Taylor Corporation
1725 Roe Crest Drive
P.O. Box 3728
North Mankato, MN 56002-3728
Arnold G. Kuntz Director
formerly Director of Congregational Relations
Christ College
5751 Richmond Avenue
Garden Grove, CA 92645
Robert E. Long Director
Senior Vice President Administration
Park Bank
7540 West Capitol Drive
Milwaukee, WI 53216
Robert B. Peregrine Director
President
Peregrine Law Offices, S.C.
633 West Wisconsin Avenue
Milwaukee, WI 53203
Roger G. Wheeler Director
President
Wheel-Air Charter, Inc.
8891 Airport Road
Minneapolis, MN 55449
Marlene Wilson Director
President
Volunteer Management Associates
1113 Spruce Street, Suite 406
Boulder, CO 80302
</TABLE>
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE ADVISORY AGREEMENT.
OTHER BUSINESS
Management of the Fund is not aware of any other matters that will come
before the Special Meeting. However, if any other business should come
before the Special Meeting, your proxy, if signed and returned, will give
discretionary authority to the
-8-
<PAGE> 13
persons designated in it to vote according to their best judgment on such
matters.
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS OF AAL VARIABLE PRODUCT SERIES FUND, INC.
The following table sets forth information with respect to each Director
and officer of the Fund who also is an officer, employee or Director of the
Adviser. Except as indicated otherwise, the business address of all of the
following persons is 4321 North Ballard Road, Appleton, WI 54919-0001.
<TABLE>
<CAPTION>
POSITION(S) WITH
NAME THE FUND POSITION(S) WITH THE ADVISER
------------------------------- ---------------- ------------------------------
<S> <C> <C>
Richard L. Gunderson Director Chief Executive Officer and
Chairman of the Board, Aid
Association for Lutherans
John O. Gilbert Director President, Chief Operating
Officer, and Director, Aid
Association for Lutherans
John H. Pender Director Retired; Formerly Senior Vice
President and Chief Investment
Officer, Aid Association for
Lutherans
D. Charles DeVries President Vice President, Retirement
Products, Aid Association for
Lutherans
H. Michael Spence Vice President President, AAL Capital
Management Corporation
Carl J. Rudolph Treasurer Vice President and Controller,
Aid Association for Lutherans
James H. Abitz Assistant Treasurer Vice President, Securities, Aid
Association for Lutherans
Mark J. Mahoney Secretary Assistant General Counsel, Aid
Association for Lutherans
Carl M. Rizzo Assistant Secretary and Securities Compliance Officer,
Compliance Officer Aid Association for Lutherans
</TABLE>
PORTFOLIO TRANSACTION AND BROKERAGE
For the year ended December 31, 1995, the Portfolios paid brokerage
commissions in the aggregate amount of $57,393.
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<PAGE> 14
PRINCIPAL SHAREHOLDERS AND CERTAIN BENEFICIAL OWNERS
Other than AAL, no person was known to own of record or beneficially
five percent (5%) or more of the outstanding shares of the Portfolios or the
Fund.
None of the Fund's Directors nor its President owned beneficially any
shares of any of the Portfolios as of January 31, 1996. As of that date, the
total number of shares of any Portfolio owned beneficially by all executive
officers and Directors of the Fund, as a group, were as follows (which
represented less than 1% of all of the outstanding shares of each of the named
Portfolios): AAL Variable Product Large Company Stock Portfolio -- 242 shares;
and, AAL Variable Product Small Company Stock Portfolio -- 490 shares. The
executive officers and Directors of the Fund owned beneficially no shares of
the other Portfolios as of that date.
COST OF SOLICITATION
In addition to this solicitation of proxies by use of the mails, proxies
may be solicited by officers of the Fund and by officers and employees of the
Adviser, personally or by telephone or telegraph, without special compensation.
Proxies may also be solicited by a professional proxy solicitation service
should management of the Fund determine that solicitation by such means is
advisable. The cost of preparing and mailing proxy materials, of the Special
Meeting (including any adjourned sessions thereof), and of soliciting proxies
will be borne by AAL.
ADJOURNMENT
In the event that sufficient votes in favor of the proposal set forth
in the Notice of Special Meeting which accompanies this Proxy Statement are not
received by the time scheduled for the Special Meeting, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to the proposal. Any such
adjournment will require the affirmative vote of a majority of the votes cast
on the question in person or by proxy at the session of the Special Meeting to
be adjourned. The persons named as proxy will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
proposal. They will vote against any such adjournment those proxies required
to be voted against the proposal. A shareholder vote may be taken on one
proposal set forth in the Notice of Special Meeting which accompanies this
Proxy Statement prior to any such adjournment if sufficient votes have been
received for approval.
SHAREHOLDER MEETINGS
The Fund is organized as a Maryland Corporation, and as such is subject to
Maryland law. Pursuant to Maryland law and the Articles of Incorporation of
the Fund, the Fund is not required to hold a
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<PAGE> 15
shareholder meeting in any year in which the election of Directors, approval of
the Investment Advisory Agreement or ratification of the selection of
independent public accountants is not required to be acted upon by shareholders
of the Fund under the 1940 Act. Meetings of the shareholders of the Fund will
be held when and as determined necessary by the Board of Directors of the Fund
and in accordance with the 1940 Act. Other than the Special Meeting to which
this Proxy Statement relates, the Fund currently does not anticipate that it
will hold a meeting of shareholders in 1996.
Shareholders who wish to present a proposal for action at the next
meeting or suggestions as to nominees for the Board of Directors should submit
the proposal or suggestions to the following address: The AAL Variable Product
Series Fund, Inc., 4321 North Ballard Road, Appleton, Wisconsin 54919,
Attention: Mark J. Mahoney, Secretary.
By Order of the Board of Directors
/s/ Mark J. Mahoney
Mark J. Mahoney, Secretary
Appleton, Wisconsin
March 15, 1996
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<PAGE> 16
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AAL Variable Product Large Company Stock Portfolio
The undersigned hereby appoints D. Charles DeVries and Mark J. Mahoney, or
either of them, proxy, with full power of substitution, to represent and vote,
as designated below, all shares of the above-referenced Portfolio that the
undersigned is entitled to vote at the Special Meeting of Shareholders of AAL
Variable Product Series Fund, Inc. to be held at 4321 North Ballard Road,
Appleton, Wisconsin 54919 beginning at 10:00 a.m. local time, on April 24,
1996, or at any adjournment thereof, with respect to the matters set forth
below and described in the accompanying Notice of Special Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
______________________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
DATED:__________________________________________, 1996
_____________________________________________________
| |
|_____________________________________________________|
(Please sign exactly as name appears at left) AAL VPSF
* * * * *
Shares represented by this proxy will be voted as directed. IF NO DIRECTION IS
SUPPLIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. /X/
- --------------------------------------------------------------------------------
1. Proposal to approve the amendment to the current Investment Advisory
Agreement between AAL Variable Product Series Fund, Inc. and Aid
Association for Lutheran in the form attached as Appendix A to the
accompanying Proxy Statement. /__/ FOR /__/ AGAINST /__/ ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
AAL VPSF
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<PAGE> 17
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AAL Variable Product Small Company Stock Portfolio
The undersigned hereby appoints D. Charles DeVries and Mark J. Mahoney, or
either of them, proxy, with full power of substitution, to represent and vote,
as designated below, all shares of the above-referenced Portfolio that the
undersigned is entitled to vote at the Special Meeting of Shareholders of AAL
Variable Product Series Fund, Inc. to be held at 4321 N. Ballard Road,
Appleton, Wisconsin 54919 beginning at 10:00 a.m. local time, on April 24,
1996, or at any adjournment thereof, with respect to the matters set forth
below and described in the accompanying Notice of Special Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
______________________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
DATED:__________________________________________, 1996
_____________________________________________________
| |
|_____________________________________________________|
(Please sign exactly as name appears at left) AAL-VPSF
* * * * *
Shares represented by this proxy will be voted as directed. IF NO DIRECTION IS
SUPPLIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. /X/
- --------------------------------------------------------------------------------
1. Proposal to approve the amendment to the current Investment Advisory
Agreement between AAL Variable Product Series Fund, Inc. and Aid
Association for Lutherans, in the form attached as Appendix A to the
accompanying Proxy Statement. /___/ FOR /___/ AGAINST /___/ ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
AAL VPSF
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<PAGE> 18
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AAL Variable Product Bond Portfolio
The undersigned hereby appoints D. Charles DeVries and Mark J. Mahoney,
or either of them, proxy, with full power of substitution, to represent and
vote, as designated below, all shares of the above-referenced Portfolio that
the undersigned is entitled to vote at the Special Meeting of Shareholders of
AAL Variable Product Series Fund, Inc. to be held at 4321 North Ballard Road,
Appleton, Wisconsin 54919 beginning at 10:00 a.m. local time, on April 24,
1996, or at any adjournment thereof, with respect to the matters set forth
below and described in the accompanying Notice of Special Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
___________________________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
DATED:__________________________________________, 1996
____________________________________________________
| |
|____________________________________________________|
(Please sign exactly as name appears at left) AAL-VPSF
* * * * *
Shares represented by this proxy will be voted as directed. IF NO DIRECTION
IS SUPPLIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. /X/
- --------------------------------------------------------------------------------
1. Proposal to approve the amendment to the current Investment Advisory
Agreement between AAL Variable Product Series Fund, Inc. and Aid
Association for Lutherans, in the form attached as Appendix A to the
accompanying Proxy Statement. /___/ FOR /___/ AGAINST /___/ ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
AAL VPSF
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<PAGE> 19
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AAL Variable Product Balanced Portfolio
The undersigned hereby appoints D. Charles DeVries and Mark J. Mahoney, or
either of them, proxy, with full power of substitution, to represent and vote,
as designated below, all shares of the above-referenced Portfolio that the
undersigned is entitled to vote at the Special Meeting of Shareholders of AAL
Variable Product Series Fund, Inc. to be held at 4321 North Ballard Road,
Appleton, Wisconsin 54919 beginning at 10:00 a.m. local time, on April 24,
1996, or at any adjournment thereof, with respect to the matters set forth
below and described in the accompanying Notice of Special Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
__________________________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
DATED:__________________________________________, 1996
_____________________________________________________
| |
|_____________________________________________________|
(Please sign exactly as name appears at left) AAL VPSF
* * * * *
Shares represented by this proxy will be voted as directed. IF NO DIRECTION
IS SUPPLIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
Please vote by filling in the appropriate box below, as shown, using blue or
black or dark pencil. Do not us red ink. /X/
- --------------------------------------------------------------------------------
1. Proposal to approve the amendment to the current Investment Advisory
Agreement between AAL Variable Product Series Fund, Inc. and Aid
Association for Lutherans, in the form attached as Appendix A to the
accompanying Proxy Statement. /___/ FOR /___/ AGAINST /___/ ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
AAL VPSF
- --------------------------------------------------------------------------------
<PAGE> 20
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AAL Variable Product Money Market Portfolio
The undersigned hereby appoints D. Charles DeVries and Mark J. Mahoney, or
either of them, proxy, with full power of substitution, to represent and vote,
as designated below, all shares of the above-referenced Portfolio that the
undersigned is entitled to vote at the Special Meeting of Shareholders of AAL
Variable Product Series Fund, Inc. to be held at 4321 North Ballard Road,
Appleton, Wisconsin 54919 beginning at 10:00 a.m. local time, on April 24,
1996, or at any adjournment thereof, with respect to the matters set forth
below and described in the accompanying Notice of Special Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
__________________________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
DATED:__________________________________________, 1996
_____________________________________________________
| |
|_____________________________________________________|
(Please sign exactly as name appears at left) AAL VPSF
* * * * *
Shares represented by this proxy will be voted as directed. IF NO DIRECTION
IS SUPPLIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink. /X/
- --------------------------------------------------------------------------------
1. Proposal to approve the amendment to the current Investment Advisory
Agreement between AAL Variable Product Series Fund, Inc. and Aid
Association for Lutherans, in the form attached as Appendix A to the
accompanying Proxy Statement. /___/ FOR /___/ AGAINST /___/ ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
AAL VPSF
- --------------------------------------------------------------------------------
<PAGE> 21
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT made and entered into this 27th day
of September, 1994, by and between THE AAL VARIABLE PRODUCT SERIES FUND, INC.
(the "FUND"), a Maryland corporation, and Aid Association of Lutherans, a
Wisconsin corporation (the "ADVISER").
The FUND is an open-end management investment company registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
(the "Act"). The FUND is a series type investment company, with each series
having its own investment objectives, policies and restrictions. AAL is
registered with the Securities and Exchange Commission as an Investment Adviser
under the Investment Advisers Act of 1940.
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 FUND hereby appoints the ADVISER to act as investment adviser to
the FUND with respect to its series of shares described on Exhibit A attached
hereto, which may be amended from time to time. Each series is referred to
herein individually as a "Portfolio" and collectively as the "Portfolios." The
ADVISER agrees, all as more fully set forth herein, to provide professional
investment management with respect to the investment of the assets of each
Portfolio and to supervise and arrange the purchase and sale of securities and
other assets held in each Portfolio and generally administer the affairs of the
FUND. The ADVISER may engage, at the ADVISER's cost and under the ADVISER's
supervision, on behalf of the FUND or any Portfolio, the services of a
Sub-Adviser, or an agent to perform certain administrative services, subject to
any limitations imposed by the Act.
2. DUTIES AND OBLIGATIONS OF THE ADVISER WITH RESPECT TO MANAGEMENT OF THE
FUND
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Directors of the
FUND, the ADVISER, as agent and attorney-in-fact with respect to the
FUND, is authorized, in its discretion and without prior consultation
with the FUND to:
(i) Buy, sell, exchange, convert for the FUND's use, 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 ADVISER may select;
(iii) Formulate programs, obtain necessary information, and
periodically report to the FUND's Board of Directors.
(b) Any investment purchases or sales made by the ADVISER shall at
all times conform to, and be in accordance with, any requirements
imposed by:
(i) the provisions of the Act and of any rules or
regulations in force thereunder; (ii) the provisions of the
Internal Revenue Code; (iii) any other applicable provisions
of law; (iv) the provisions of the Articles of Incorporation
and By-Laws of the FUND as amended from time to time; (v) any
policies and determinations of the Board of Directors of the
FUND; and (vi) the fundamental policies of the FUND, as
reflected in its Registration Statement under the Act, or as
amended by the shareholders of the FUND.
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(c) The ADVISER shall also administer the affairs of the FUND and, in
connection therewith, shall be responsible for: (i) maintaining the FUND's
books and records, including all financial, accounting, corporate and other
records required by and in accordance with applicable law (other than financial
or accounting books and records maintained by the FUND's custodian or transfer
agent) which books and records shall be the property of the FUND and shall be
surrendered by the ADVISER promptly on the request of the FUND, without charge
except for the ADVISER's direct expenses; (ii) overseeing the FUND's insurance
relationships; (iii) preparing for the FUND (or assisting counsel and/or
auditors in the preparation of) all required tax returns, proxy statements and
reports to the FUND's shareholders and Directors and reports to and other
filings with the Securities and Exchange Commission, and any other governmental
agency including any filings necessary to maintain the registrations and
qualifications of the FUND and its shares under federal and state law (the FUND
agreeing to supply or cause to be supplied to the ADVISER 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 FUND's registration and/or the registration of the shares of the
FUND under the securities or "Blue Sky" laws of the various states selected by
the FUND's distributor (the Portfolio or Portfolios 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 ADVISER, or referring the inquiry for response, if any such inquiry or
communication is more properly to be responded to by other parties, such as the
FUND's custodian, or other person or agent of the ADVISER, and overseeing its
response thereto; (vi) overseeing all relationships between the FUND and its
persons and agents, including any custodian(s), transfer agent(s), dividend
disbursing agent, independent auditor and independent legal counsel, including
assistance in selection of such persons and agents, the negotiation of
agreements and the supervision of the performance of such agreements; (vii)
authorizing and directing any of the ADVISER's Directors, officers and
employees who may be elected as Directors or officers of the FUND to serve in
the capacities in which they are elected; and (viii), providing the services of
individuals competent to perform all of the FUND's executive, administrative,
compliance and clerical functions that are not performed by or through
employees or other persons or agents engaged by the FUND; and (ix) calculating
the daily net asset value and the net asset value per share for each of the
FUND's Portfolios. All services to be furnished by the ADVISER under this
Agreement may be furnished through the medium of any Directors, officers,
employees or agents of the ADVISER.
(d) Nothing in this Agreement shall prevent the ADVISER or any "affiliated
person" (as defined in the Act) of the ADVISER from acting as investment
adviser or manager and/or principal underwriter for any other person, firm or
corporation and shall not in any way limit or restrict the ADVISER 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 ADVISER expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations to the FUND under this Agreement.
(e) It is agreed that the ADVISER shall have no responsibility or liability for
the accuracy or completeness of the FUND's Registration Statement under the Act
or the Securities Act of 1933 except for information supplied by the ADVISER
for inclusion therein.
(f) The ADVISER shall act as an independent contractor for the purposes herein
and, unless otherwise expressly provided or authorized, shall have no authority
to act for or represent the FUND in any way or otherwise be deemed an agent of
the FUND.
(g) The ADVISER shall have the authority to make combined purchases and sales
of securities for the Portfolios, the ADVISER's own accounts, or for its other
clients. If various entities desire to buy or sell securities at about the same
time, the ADVISER may allocate the transactions at an average price and as
nearly as practicable on a pro-rata basis in proportion to the amounts desired
to be purchased or sold by each entity.
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<PAGE> 23
3. STANDARD OF CARE AND INDEMNIFICATION
ADVISER shall at all times act in good faith and use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this Agreement, but assumes no responsibility and shall not be liable for loss
or damage due to errors; provided, that ADVISER shall indemnify and hold the
FUND and each of its Directors, officers, and employees and each person, if
any, who controls the FUND within the meaning of Section 15 of the 1933 Act,
harmless from all loss, cost, damage, and expense, including reasonable
attorneys' fees, incurred by the FUND as a result of ADVISER's gross
negligence, bad faith, or willful misfeasance in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties under this
Agreement, or that of its officers, agents and employees, in the performance of
this Agreement. Notwithstanding the preceding language, ADVISER shall
indemnify and hold the FUND, and each of its Directors, officers, and employees
and each person, if any, who controls the FUND within the meaning of Section 15
of the 1933 Act, harmless from all loss, cost, damage, and expense, including
reasonable attorneys' fees incurred by the FUND as a result of the failure at
any time of any Portfolio of the FUND (i) to operate as a regulated investment
company in compliance with Subchapter M of the Code and the regulations
thereunder, or (ii) to comply with the investment diversification rules of
Section 817(h) of the Code and the regulations thereunder.
The FUND shall indemnify and hold ADVISER harmless from all loss, cost,
damage and expense, including reasonable attorneys' fees incurred by it
resulting from any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting upon any
instruction reasonably believed by it to have been properly executed by a duly
authorized officer of the FUND, or upon any information, data, records or
documents provided ADVISER or its agents by computer tape, telex, CRT data
entry or other similar means authorized by the FUND; provided, that this
indemnification shall not apply to actions or omissions of ADVISER in cases of
its own gross negligence, bad faith or willful misfeasance in the performance
of its duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement, or that of its officers, agents and employees, in
the performance of this Agreement.
In order that the indemnification provisions contained in this
Agreement shall apply, however, it is understood that if in any case the one
party (the "Indemnitor") may be asked to indemnify or save the other party (the
"Indemnitee") harmless, the Indemnitor shall be fully and promptly advised of
all pertinent facts concerning the matters in question, and it is further
understood that the Indemnitee will use all reasonable care to identify and
notify the Indemnitor promptly concerning any situation which presents or
appears likely to present the probabilty of such claim for indemnification
against the Indemnitor. The Indemnitor shall have the option to defend the
Indemnitee against any claim which may be the subject of this indemnification,
and in the event that the Indemnitor so elects, it will so notify the
Indemnitee, and thereupon the Indemnitor shall take over complete defense of
the claim, and the Indemnitee shall in such situations incur no further legal
or other expenses for which it shall seek or be entitled to indemnification
under this paragraph. The Indemnitee shall in no case confess any claim or
make any compromise in any case in which the Indemnitor will be asked to
indemnify the Indemnitee except with the Indemnitor's prior written consent.
Neither party to this Agreement shall be liable to the other party for
consequential damage under any provision of this Agreement or for any act or
failure to act hereunder.
4. 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 Portfolio by placing purchase and sale orders for the Portfolio,
the ADVISER shall select such broker-dealers ("brokers") as shall, in the
ADVISER's judgment, implement the policy of the FUND to achieve "best
execution," i.e., prompt and efficient execution at the most favorable net
price. In making such selection, the ADVISER is authorized to consider the
reliability, integrity and financial condition of the broker. The ADVISER is
also authorized to consider whether the broker provides brokerage and/or
research services to the FUND and/or other accounts of the ADVISER. The
commissions paid to such brokers may be higher than another broker would have
charged if a good faith determination is
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<PAGE> 24
made by the ADVISER that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
ADVISER's overall responsibilities as to the accounts as to which it exercises
investment discretion. The ADVISER 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 ADVISER
shall be prepared to show that commissions paid (i) were for purposes
contemplated by this Agreement; (ii) provide lawful and appropriate assistance
to the ADVISER in the performance of its decision-making responsibilities; and
(iii) were within a 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 FUND recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty
of the transaction in question. The ADVISER is also authorized to consider as a
factor in the selection of brokers to execute brokerage and principal
transactions, subject to the requirements of "best execution," as defined
above, sales by brokers of variable annuity contracts resulting in sales of
FUND shares.
5. ALLOCATION OF EXPENSES
The ADVISER agrees that it will furnish the FUND, at the ADVISER's
expense, with all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The ADVISER will
also pay all compensation of all Directors, officers and employees of the FUND
who are affiliated persons of the ADVISER. All costs and expenses not expressly
assumed by the ADVISER under this Agreement shall be paid by the FUND,
including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Directors other than those affiliated with the ADVISER; (v) independent legal
and audit expenses; (vi) fees and expenses of the FUND'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 FUND or its shares; (ix) FUND or Portfolio organizational expenses;
(x) FUND expenses of preparing, printing and mailing reports and notices, proxy
material and prospectuses to shareholders of the FUND; (xi) all other expenses
incidental to holding meetings of the FUND's shareholders; (xii) dues or
assessments of or contributions to the Investment Company Institute or any
successor or other industry assocation; (xiii) such non-recurring expenses as
may arise, including litigation affecting the FUND and the legal obligations
which the FUND may have to indemnify its officers and Directors with respect
thereto; and (xiv) cost of daily valuation of each of the Portfolio's
securities and net asset value per share.
Notwithstanding the foregoing, AAL agrees to reimburse the FUND for
substantially all of its operating expenses, other than investment advisory
fees, brokerage commissions, and any extraordinary items such as litigation
expenses or income tax liabilities. AAL may withdraw this undertaking upon 30
days' written notice to the FUND.
6. COMPENSATION OF THE ADVISER
(a) The FUND agrees to pay the ADVISER and the ADVISER agrees to
accept as full compensation for all services rendered by the ADVISER as
such, an annual management fee, payable monthly and computed on the
average daily net asset value of each Portfolio as shown on "Exhibit A"
attached hereto. The annual management fee will be prorated for any
month during which this Agreement is in effect for only a portion of
the month.
(b) In the event the expenses of a Portfolio (including the fees of
the ADVISER and amortization of organization expenses, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses)
for any fiscal year exceed the limits set by applicable regulations of
state securities commissions, the ADVISER will reduce its fee by up to
the amount of such excess. Any such
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<PAGE> 25
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.
The fees payable to the ADVISER by the FUND or a Portfolio
hereunder shall be reduced by any tender offer solicitation fees or
similar payments received by the ADVISER, or any affiliated person of
the ADVISER, in connection with the tender of securities held by the
Portfolio (less any direct expenses incurred by the ADVISER, or any
affiliated person of the ADVISER, in connection with obtaining such
fees or payments). The ADVISER shall use its best efforts to recapture
all available tender offer solicitation fees and similar payments in
connection with the tenders of the securities held by a Portfolio,
provided, however, that neither the ADVISER, nor any affiliated person
of the ADVISER, shall be required to register as a broker-dealer for
this purpose. The ADVISER shall advise the FUND's Board of Directors
of any fees or payments of whatever type that it may be possible for
the ADVISER, or an affiliated person of the ADVISER, to receive in
connection with the purchase or sale of securities held by a Portfolio.
The fees payable to the ADVISER by a Portfolio hereunder shall be
reduced by any such fees or payments received, less any direct
expenses incurred by the ADVISER or any affiliate of the ADVISER in
obtaining such fees.
7. DURATION AND TERMINATION
(a) This Agreement shall go into effect as to each Portfolio on the
date set forth above and shall, unless terminated as hereinafter
provided, continue in effect for a period of not more than two years
from the effective date only so long as such continuance is specifi-
cally approved at least annually by the FUND's Board of Directors,
including the vote of a majority of the Directors 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, or with respect to any Portfolio by the vote
of a "majority" (as defined in the Act) of the outstanding voting
shares of that Portfolio.
(b) This Agreement may be terminated by the ADVISER at any time
without penalty upon giving the FUND sixty (60) days' written notice
(which notice may be waived by the FUND) and may be terminated by the
FUND at any time without penalty upon giving the ADVISER sixty (60)
days' written notice (which notice may be waived by the ADVISER),
provided that such termination by the FUND shall be directed or
approved by the vote of a majority of all of its Directors in office
at the time, or with respect to any Portfolio, by the vote of a
"majority" (as defined in the Act) of the outstanding voting shares of
that Portfolio. This Agreement shall automatically terminate in the
event of its "assignment" (as defined in the Act).
(c) The FUND hereby agrees that if (i) the ADVISER ceases to act as
investment adviser to the FUND and (ii) the ADVISER notifies the FUND
that, in the ADVISER's judgment, continued use of the FUND's present
name would create confusion in the context of the ADVISER's business
or that of Aid Association for Lutherans or its subsidiaries
and/or affiliates, the FUND will use its best efforts to change its
name in order to delete the abbreviation "AAL" from its name and will
discontinue use of the name or any sales literature or advertising
materials in which the "AAL" name is used as soon as possible, in no
event exceeding 30 days from the date ADVISER ceases to act as
investment adviser to the FUND or so notifies the FUND.
8. EXHIBITS
The document entitled "Exhibit A" to the AAL Variable Product Series
Fund, Inc. Investment Advisory Agreement, attached hereto, is added to and
incorporated herein.
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<PAGE> 26
9. AMENDMENTS
This Agreement may be amended at any time by mutual consent of the parties
in accordance with the Act, provided that the amendment shall have been
approved, in accordance with the Act, with respect to any Portfolio by the vote
of a "majority" (as defined by the Act) of the outstanding voting shares of
that Portfolio.
10. STATE LAW
This Agreement shall be governed in all respects in accordance with the
laws of the State of Maryland.
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.
THE AAL VARIABLE PRODUCT SERIES FUND, INC.
By: /s/ D. Charles DeVries
------------------------------------
D. Charles DeVries
President
By: /s/ Mark J. Mahoney
------------------------------------
Mark J. Mahoney
Secretary
AID ASSOCIATION FOR LUTHERANS
By: /s/ Richard L. Gunderson
------------------------------------
Richard L. Gunderson
President and
Chief Executive Officer
By: /s/ William R. Heerman
------------------------------------
William R. Heerman
Senior Vice President
Secretary and General Counsel
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EXHIBIT A
TO THE AAL VARIABLE PRODUCT SERIES FUND, INC. INVESTMENT ADVISORY AGREEMENT
(Dated September 27, 1994)
1. THE AAL VARIABLE PRODUCT MONEY MARKET PORTFOLIO
The management fee for this Portfolio, calculated in accordance with
paragraph 5 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over
$250 million.
2. THE AAL VARIABLE PRODUCT LARGE COMPANY STOCK PORTFOLIO
The management fee for this Portfolio, calculated in accordance with
section 6 of AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over
$250 million.
3. THE AAL VARIABLE PRODUCT BOND PORTFOLIO
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over
$250 million.
4. THE AAL VARIABLE PRODUCT SMALL COMPANY STOCK PORTFOLIO
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over
$250 million.
5. THE AAL VARIABLE PRODUCT BALANCED PORTFOLIO
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over
$250 million.
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FIRST AMENDMENT TO ADVISORY AGREEMENT
THIS AMENDMENT is made and entered into as of this 28th day of February,
1996 by and between AAL VARIABLE PRODUCT SERIES FUND, INC., a Maryland
corporation (the "Fund"), and AID ASSOCIATION FOR LUTHERANS, a Wisconsin
corporation (the "Adviser").
WHEREAS, the Fund and the Adviser have entered into that certain Advisory
Agreement dated as of September 27, 1994 (the "Advisory Agreement"); and
WHEREAS, by its terms the Advisory Agreement will automatically terminate
on September 27, 1996, and the Fund and the Adviser desire to amend Section 7(a)
of the Advisory Agreement to extend the term for an additional two years and to
provide for its continuance thereafter from year to year, subject to annual
approval;
WHEREAS, the Advisory Agreement presently includes, among the factors that
the Adviser must demonstrate to the Fund to show the reasonableness of
brokerage commissions paid by the Fund, that the commissions paid provide
lawful and appropriate assistance to the Adviser in its decision-making
responsibilities, and the Adviser and the Fund believe this factor more
appropriately is a factor to be considered by the Adviser in selecting brokers,
and the Fund and the Adviser therefore desire to amend Section 4 of the
Advisory Agreement to achieve this objective;
WHEREAS, Paragraph 1 of Exhibit A to the Advisory Agreement contains an
errant cross-reference to "paragraph 5" of the Advisory Agreement, which
cross-reference should reference "Section 6" of the Advisory Agreement, and the
Fund and the Adviser desire to amend Exhibit A to the Advisory Agreement to
correct this cross reference.
NOW, THEREFORE, the parties hereto agree that, subject to approval by
shareholders as described below, Section 4, Section 7(a), and Paragraph 1 of
Exhibit A to the Advisory Agreement shall be amended to read in their entirety
as follows:
4. 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 Portfolio by placing
purchase and sale orders for the Portfolio, the ADVISER shall
select such broker-dealers ("brokers") as shall, in the ADVISER's
judgment, implement the policy of the FUND to achieve "best
execution," i.e., prompt and efficient execution at the most
favorable net price. In making such selection, the ADVISER is
authorized to consider the reliability, integrity and financial
condition of the broker. The ADVISER is also authorized to
consider whether the broker provides brokerage and/or research
services to the FUND and/or other accounts of the ADVISER, which
services are to provide lawful and appropriate assistance to the
ADVISER in the performance of its decision-making
responsibilities. The commissions paid to such brokers may be
higher than another broker would have charged if a good faith
determination is made by the ADVISER that the commission is
reasonable in relation to the services provided, viewed in terms
of either that particular transaction or the ADVISER's overall
responsibilities as to the accounts as to which it exercises
investment discretion. The ADVISER shall use its judgment in
determining that the amount of commissions paid are reasonable in
relation to the value of brokerage and/or 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 are in good faith, and to show the overall
reasonableness of commissions paid, the ADVISER shall be prepared
to show that commissions paid (i)
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were for purposes contemplated by this Agreement; and (ii) were
within a 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 FUND
recognizes that, on any particular transaction, a higher than
usual commission may be paid due to the difficulty of the
transaction in question. The ADVISER is also authorized to
consider as a factor in the selection of brokers to execute
brokerage and principal transactions, subject to the requirements
of "best execution," as defined above, sales by brokers of
variable annuity contracts resulting in sales of FUND shares.
7. DURATION AND TERMINATION
(a) Unless sooner terminated as hereinafter provided, this
Agreement shall continue in effect as to each Portfolio
until April 24, 1998 and thereafter from year to year, but
only so long as such continuance beyond such date is
specifically approved at least annually by the FUND's
Board of Directors, including the vote of a majority of
the Directors 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, or with respect to any
Portfolio by the votes of a "majority" (as defined in the
Act) of the outstanding voting shares of that Portfolio.
EXHIBIT A
1. THE AAL VARIABLE PRODUCT MONEY MARKET PORTFOLIO
The management fee for this Portfolio, calculated in
accordance with Section 6 of The AAL Variable Product Series
Fund, Inc. Investment Advisory Agreement, shall be at the annual
rate of 0.35 of 1% on the first $250 million of average daily net
assets and 0.30 of 1% on average daily net assets over $250
million.
FURTHER AGREED that this Amendment shall not become effective as to any
Portfolio unless and until approved by "a majority of the outstanding shares"
of such Portfolio (as defined in the Investment Company Act of 1940, as
amended) at a special meeting of shareholders of the Fund to be called and held
for that purpose at the direction of the Fund's Board of Directors.
FURTHER AGREED that, except as defined otherwise herein, capitalized
terms used in this Amendment shall have the meanings given to them in the
Advisory Agreement. Except as expressly set forth herein, the Advisory
Agreement shall remain in full force and effect, unaffected by this Amendment.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed by its duly authorized officer as of the day and year first
written above.
AAL VARIABLE PRODUCT SERIES FUND, INC. AID ASSOCIATION FOR LUTHERANS
By: /s/ D. Charles DeVries By: /s/ Richard L. Gunderson
---------------------------------- ----------------------------------
D. Charles DeVries, President Richard L. Gunderson,
Chief Executive Officer
Attest: /s/ Mark J. Mahoney Attest: /s/ Woodrow E. Eno
------------------------------ ------------------------------
Mark J. Mahoney, Secretary Woodrow E. Eno, Senior Vice
President, Secretary and
General Counsel
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