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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
THE AAL MUTUAL FUNDS, 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
December --, 1997
Re: SPECIAL MEETING OF SHAREHOLDERS OF THE AAL VARIABLE PRODUCT SMALL COMPANY
STOCK PORTFOLIO
Dear Certificate Owner:
Enclosed is a notice of a Special Meeting of Shareholders of the AAL Variable
Product Small Company Stock Portfolio ("Portfolio"), a portfolio of the AAL
Variable Product Series Fund, Inc., to be held on Friday, February 13, 1998,
together with a Proxy Statement and form of Proxy relating to the business to be
transacted at the meeting.
This Special Meeting of Shareholders is being called for the purpose of
considering and acting upon a change to the fundamental investment objective of
the Portfolio. The Portfolio's present objective seeks investment results that
approximate the Wilshire SmallCap Index by investing primarily in common stocks
included in this index. The nature of the index and the manner in which the
index alters its composition have made it difficult for the Portfolio to track
the index on a timely basis. This has resulted in a greater variation in
approximating the investment results of the index than the Board feels is
desirable for Certificate Owners. Therefore, the Board of Directors has
determined that it is in the best interests of the Certificate Owners to amend
the Portfolio's fundamental objective by substituting a different small company
stock index, the S&P SmallCap 600 Index, for the Wilshire SmallCap Index, in
order to better approximate the investment results of small company stocks. No
other business is scheduled to be transacted.
If the proposed change is approved by the Shareholders, the revised investment
objective will be implemented approximately 2 weeks following approval, or March
1, 1998, based upon a February 13, 1998, approval. The investment objective
would remain fundamental and could only be further changed with the approval of
the Portfolio's shareholders.
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 ---------.
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/ Steven A. Weber
----------------------------
Steven A. Weber, President
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC.
4321 NORTH BALLARD ROAD APPLETON, WISCONSIN 54919
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS of the
AAL Variable Product Small Company Stock Portfolio
To Be Held on February 13, 1998
A Special Meeting of the Shareholders of the AAL Variable Product Small
Company Stock Portfolio ("Portfolio"), a series of the AAL Variable Product
Series Fund, Inc. will be held at 222 West College Avenue, Appleton, Wisconsin,
on February 13, 1998, beginning at 10:00 a.m. local time for the following
purpose(s):
1. To approve or disapprove a proposed change to the Portfolio's
fundamental investment objective as described in the accompanying
Proxy Statement; and
2. To transact any other business as may properly come before the
meeting, or adjournment thereof.
The Board of Directors has fixed the close of business on Friday, November 28,
1997, 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.
The Portfolio issues and sells its shares to AAL Variable Annuity Account I
("Variable Account"), where the shares are held to fund benefits under variable
annuity certificates issued by AAL in the Variable Account ("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 May 1, 1997, 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 the Portfolio 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 The AAL Variable
Product Series Fund, Inc.
/s/ Mark J. Mahoney
-----------------------------------
Mark J. Mahoney, Secretary
<PAGE>
Appleton, Wisconsin
December --, 1997
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED FORM(S) OF
PROXY AND RETURN THEM PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE PROVIDED FOR
THAT PURPOSE.
PROXY STATEMENT
AAL VARIABLE PRODUCT SMALL COMPANY STOCK 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 December , 1997
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 Special
Meeting of Shareholders (the "Special Meeting") of the AAL Variable Product
Small Company Stock Portfolio ("Portfolio") to be held on February 13, 1998. The
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 AAL in the Variable Account (the "Certificates").
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 about 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 $78 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 9,500 local AAL branches
throughout the U.S. As the owner of all of the assets held in the Variable
Account, AAL is the sole shareholder of the Portfolio and is entitled to vote
all of the shares of the Portfolio held in the Variable Account. However,
pursuant to applicable laws, the Fund's current Prospectus dated May 1, 1997 and
the Fund's Articles of Incorporation and Bylaws, AAL votes outstanding shares of
the Portfolio 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 the Portfolio as of Friday, November 28, 1997 (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.
PURPOSE
The purpose of the Special Meeting is to approve a change to the fundamental
investment objective of the Portfolio. The Portfolio's present objective seeks
investment results that approximate the Wilshire SmallCap Index by investing
primarily in common stocks included in this index. The nature of the index and
the manner in which the index alters its composition have made it difficult for
the Portfolio to track the index on a timely basis. This has resulted in a
greater variation in approximating the investment results of the index than the
Board feels is desirable for Certificate Owners. Therefore, the Board of
Directors has determined that it is in the best interests of the Certificate
Owners to amend the Portfolio's fundamental objective by substituting a
different small company stock index, the S&P SmallCap 600 Index, for the
Wilshire SmallCap Index, in order to better approximate the investment results
of small company stocks. No other business is scheduled to be transacted.
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.
In order to be approved the proposed change to the Portfolio's fundamental
objective must be approved by a majority of its outstanding shares. 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 change to the fundamental investment objective of the
Portfolio.
AAL, as the sole shareholder of the Portfolio, will submit a Proxy for all
shares of the 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. Shares with respect to which no Proxy is received will be
voted by AAL in proportion to the shares with respect to which AAL has received
instructions from Certificate Owners. 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 change to the Portfolio's investment objective.
By way of example, suppose there were outstanding a total of 1,000 shares of the
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 change to the Portfolio's
investment objective; (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 change to the
Portfolio's investment objective. 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 shares 'AGAINST" approval, and would
abstain from voting the remaining 40 shares.
The number of votes that each Certificate Owner may instruct is determined by
dividing a Certificate's accumulated value in the subaccount as of the Record
Date by the net asset value per share of the Portfolio 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 November 28, 1997, will be entitled to one vote on each matter
presented for each share so represented. At that date, there were 9,403,217.616
shares of the 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, 1996. 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.
PROPOSAL 1: APPROVAL OF CHANGE TO THE PORTFOLIO'S FUNDAMENTAL
INVESTMENT OBJECTIVE
General
The Portfolio's current fundamental investment objective ("Present Objective")
"seeks to achieve investment results that approximate the performance of the
Wilshire SmallCap Index by investing primarily in common stocks included in the
index." The Wilshire SmallCap Index is a creation of Wilshire Associates
Incorporated, the Pacific Stock Exchange and the Chicago Board of Trade. The
Index is comprised of 250 stocks weighted by their market capitalization and its
component stocks are selected according to liquidity, industry sector and market
capitalization parameters. It is a custom-designed index intended to represent
the performance attributes of the smaller capitalization segment of the U.S.
equity markets. For reasons described later in this Proxy Statement, certain
characteristics of the Wilshire SmallCap Index make it difficult to track,
resulting in costs to the Certificate Owners as well as incurable variances
relating to achieving the Portfolio's Present Objective.
The Board of Directors is proposing to change the Present Objective by replacing
the Wilshire SmallCap Index with the S&P SmallCap 600 Index. If this change is
approved the Portfolio's new fundamental investment objective would be to "seek
to achieve investment results that approximate the performance of the S&P
SmallCap Index by investing primarily in common stocks included in the index."
The Directors identified the Russell 2000 Index and the S&P SmallCap 600 Index
as two potential alternatives to use as our benchmarks for the Portfolio. The
Russell 2000 Index has three main drawbacks that make it an inadequate
alternative. First, there are 2000 stocks in the index which would be very
difficult to replicate. Second, some of the smaller stocks in the Russell 2000
Index are extremely illiquid and, therefore, difficult to trade. Third, the
Russell 2000 Index is rebalanced only once per year like the Wilshire SmallCap
which can inhibit the correlation between the performance of index and the
overall small cap market. As discussed below, the S&P Small Cap 600 Index does
not suffer from these drawbacks. For these reasons, the Board of Directors
recommends using the S&P SmallCap Index rather than the Russell 2000 Index as
the benchmark for the Portfolio.
Comparison of the Wilshire SmallCap Index and the S&P SmallCap 600 Index
The Wilshire SmallCap Index was introduced in 1991 as an index of small cap
performance specifically for use by the Pacific Stock Exchange for trading
purposes. In order to serve this purpose it needed to include a minimal number
of representative small companies with high liquidity and low annual turnover
while still representing a broad number of industry sectors. It also had to
correlate with existing small cap stock benchmarks.
The S&P SmallCap 600 Index was introduced in October, 1994 (after the initial
registration filing for the AAL Variable Product Series Fund, Inc.), and
consists of 600 companies selected by a committee at Standard and Poors based
upon their industry, size and liquidity. None of the companies included in this
index are also included in the S&P 500 Index, which is the index used by the AAL
Variable Product Large Company Stock Portfolio. Additions and deletions of
companies in the index are on an "as needed" basis. As part of the services
provided by Standard & Poor's for a fee, such additions and deletions would be
communicated to the Portfolio's investment adviser on a prompt basis.
The following tables compare some of the quantitative characteristics of the two
indexes as of mid-year 1997.
The first table compares the composition of the various indices based on the
percentage of the total number of companies represented in each index that fall
into various specified ranges of market capitalizations. The second table
compares the composition of the various indices based on the percentage of the
total market capitalization of all companies represented in each index which is
attributable to companies falling within various specified ranges of market
capitalizations.
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Percentage of Companies (number) Wilshire SmallCap Index S&P SmallCap 600 Index
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$1billion to $5 billion 25.6% 11.3%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$500 million to$1 billion 45.6% 32.0%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$250 million to $500 million 28.8% 29.5%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
less than $250 million 0 21.2%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Percentage of Market Wilshire SmallCap Index S&P SmallCap 600 Index
Capitalization
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$1billion to 5 billion 42.1% 29.2%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$500 million to$1 billion 43.3% 42.2%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
$250 million to $500 million 14.5% 20.7%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
less than $250 million 0 7.9%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- ------------------------------------------- ------------------------------------------ -------------------------------------------
Total Returns Wilshire SmallCap Index S&P SmallCap 600 Index
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
1995 26.6 30.0
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
1996 20.0 21.3
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
6 months 1997 14.2 11.6
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Wilshire SmallCap Index S&P SmallCap 600 Index
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Traded on NYSE 54.4% 43.5%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Traded on NASDAQ 44.3% 53.5%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Traded on AMEX 1.3% 3.0%
- -------------------------------------------- ------------------------------------------ -------------------------------------------
- -------------------------------------------- ------------------------------------------ -------------------------------------------
Inception Date 1991 1994
- -------------------------------------------- ------------------------------------------ -------------------------------------------
</TABLE>
Reasons for the Proposed Change
1. Rebalancing - Wilshire rebalances its index by adding or deleting
companies only once per year. This rebalancing generally occurs in May and is
often communicated after such rebalancing has already taken place. As a result
of this annual rebalancing, the Portfolio must immediately sell those stocks
that are no longer in the index and purchase those stocks that are newly
included in the index and adjust its holdings in stocks that remain in the
index. In 1997 this rebalancing resulted in a Portfolio turnover of about 25% in
one day. Such immediate portfolio turnover makes it difficult for the Portfolio
to achieve its fundamental objective of approximating the performance of the
Wilshire Index and, in fact, has resulted in a gross tracking variation of
approximately 1.96% through the year 1996 and the first six months of 1997. The
S&P SmallCap 600 Index rebalances on an "as needed" basis throughout the year
and provides advance notice of additions and deletions of stocks from the index.
2. Communication - Wilshire communicates its index changes to the Pacific Stock
Exchange, which then communicates changes to other parties, including the
Portfolio's investment adviser. There is no system in place to use electronic
mail or other more timely means to disseminate this information, there are no
current plans to improve the timeliness of the process of disseminating this
information, and there is no third party provider who could process and
disseminate this information for a fee or otherwise. As a result, Portfolio
changes often can not be done on a timely basis, resulting in a reduced ability
of the Portfolio to approximate the results of the Wilshire Index. S&P typically
announces periodic index changes five business days before they occur.
3. Corporate Actions - In addition to rebalancing an index, companies whose
securities are included in an index may become involved in reorganizations,
mergers, consolidations, bankruptcies and other activities that change the
number and type of their outstanding securities or alter or even eliminate the
companies' existence. Wilshire currently does not actively track these
activities. As a result Portfolio changes often can not be done on a timely
basis resulting in a reduced ability of the Portfolio to approximate the results
of the Wilshire Index. S&P has an "index team" that monitors corporate
takeovers, mergers and other corporate actions and makes the appropriate changes
with advanced notice. Not only does this enable the Portfolio to better track
the Index, but the Board of Directors believes this makes the S&P SmallCap 600
Index more representative of the small cap stock market generally.
Consistency
The Fund currently has a Large Company Stock Portfolio that tracks the S&P 500
Index. S&P will not include a company in both the S&P 500 and the S&P SmallCap
600. There can be and have been companies included in both the S&P 500 and the
Wilshire SmallCap Index resulting in overlapping holdings in both the AAL Large
Company Stock Portfolio and the AAL Small Company Stock Portfolio.
Certain Effects of the Proposed Changes
The Portfolio will pay an initial, one-time charge of $325,000 (or 0.22% of
its net assets as of the Record Date) to switch to the S&P SmallCap Index. This
charge results from approximately a $0.04 per share brokerage cost. In addition,
the S&P SmallCap 600 Index may result in higher custodian fees to the Portfolio.
The custodian, Citibank, N.A. charges the Portfolio a fee of $5.00 per
transaction for each stock traded. If the Portfolio were to trade 600 rather
than 250 stocks every time it rebalanced its investments to track the index it
seeks to replicate, which occurs approximately once per week, it would cost
approximately $50,000 (or approximately 0.03% of net assets as of the Record
Date) more per year in custodian fees. Although trading a greater number of
different securities will increase implicit (bid-ask spread) and explicit (4
cents per share on listed companies) brokerage commissions, this is difficult to
quantify, and it is anticipated the negative effects of any such cost increases
would be outweighed by the benefits of lower turnover and better communication.
However, since AAL voluntarily has been reimbursing all expenses to the
Portfolio in excess of 35 basis points, any increase in operating expenses will
not affect the Portfolio's overall return for so long as such reimbursement
remains in effect. Although AAL may elect at any time to discontinue this
voluntary reimbursement, it has no present intention of doing so. In any event,
the Board of Directors believes any potential increase in operating expenses
will be immaterial, and that the benefits associated with the S&P SmallCap 600
Index make the proposed switch advisable.
Using the S&P SmallCap 600 Index as our benchmark should increase awareness of a
more recognizable trade name (S&P vs. Wilshire), and daily valuations that are
published in the Wall Street Journal and other commonly used periodicals.
Directors' Recommendation
For the reasons and considerations discussed above, the Directors unanimously
recommend that you vote `FOR" approval of the proposed change of the Portfolio's
Investment Objective.
<PAGE>
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 persons designated in it to vote according to their best
judgment on such matters.
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. The Fund's
Directors owned beneficially 3,166.579 shares of the Portfolio as of the Record
Date. As of the Record Date, the total number of shares of the Portfolio owned
beneficially by all executive officers and Directors of the Fund, as a group,
was 3,836.269 (which represented less than 1% of all of the outstanding shares
of the Portfolio).
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
Portfolio's Investment 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 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 1998. 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: 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
<PAGE>
Appleton, Wisconsin
December 1, 1997
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 Steven A. Weber, Ronald Anderson and
Mark J. Mahoney, or any of them, Proxy, with full power of substitution, to
represent and vote, as designated below, all shares of the above referenced
Portfolio with respect to which the undersigned is entitled to direct the voting
at the Special Meeting of Shareholders of AAL Variable Product Series Fund, Inc.
to be held at 222 West College Avenue, Appleton, Wisconsin beginning at 10:00
a.m. local time, on February 13, 1998, or at any adjournment thereof, with
respect to the matters set forth below and described in the accompanying Notice
of Special Meeting and Proxy Statement, receipt of which is hereby acknowledged.
(If shares are beneficially owned by more than
one person, all beneficial owners should sign.
Persons signing as executors, administrators,
trustees or in similar capacities should so
indicate.)
DATED: 199-
(Please sign exactly as name appears at left)
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. Proposed change to the fundamental investment objective of the Small
Company Stock Portfolio. FOR AGAINST ABSTAIN
2. In their discretion, Proxies are authorized to vote upon such other
business as may properly come before the meeting.
- --------------------------------------------------------------------------------
