SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
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] 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:
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AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL VARIABLE PRODUCT INTERNATIONAL STOCK PORTFOLIO
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
800-225-5225
July 1, 1998
Dear Certificate Owner:
Enclosed is a notice of a Special Meeting of Shareholders of the AAL
Variable Product International Stock Portfolio (the "Portfolio"), a portfolio of
the AAL Variable Product Series Fund, Inc. (the "Fund"), to be held on Friday,
August 14, 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
approving a new Sub-Advisory Agreement (the "New Sub-Advisory Agreement") by and
among the Fund (on behalf of the Portfolio), Aid Association for Lutherans
("AAL") and Oechsle International Advisors, LLC ("Oechsle LLC"). Approval of the
New Sub-Advisory Agreement is necessary because the existing Sub-Advisory
Agreement with Oechsle International Advisors L.P. ("Oechsle L.P.") could
terminate automatically due to what may be deemed to be a technical assignment
of that agreement. The assignment of the existing Sub-Advisory Agreement may
result from the restructuring of the existing sub-adviser, Oechsle L.P., from a
limited partnership into a limited liability company, coupled with a change in
the ownership of the new entity, as described in the accompanying Proxy
Statement. Provisions of federal securities laws provide for the automatic
termination of advisory contracts upon their assignment. New contracts can be
entered into only with shareholder approval.
The terms of the New Sub-Advisory Agreement, including sub-advisory
fees, are substantively identical to those of the current Sub-Advisory
Agreement. If the New Sub-Advisory Agreement is approved, Oechsle LLC would
replace Oechsle L.P. as the manager of the assets of the Portfolio pursuant to
the same investment objectives and policies currently in effect for the
Portfolio. Moreover, the team of investment professionals and analysts at
Oechsle LLC and the current portfolio manager will be the same as those who
served Oechsle L.P., and they will continue to be responsible for making
investment decisions for the Portfolio.
The Board of Directors of the Fund, has unanimously approved the New
Sub-Advisory Agreement and recommends that the shareholders of the Portfolio
approve the New Sub-Advisory Agreement. Subject to such approval, the New
Sub-Advisory Agreement would become effective and replace the current
Sub-Advisory Agreement upon the completion of the pending restructuring of
Oechsle L.P. Oechsle L.P. will bear all costs of this proxy solicitation and any
costs related to the Special Meeting of Shareholders. The Portfolio will not be
responsible for any of these costs.
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
800-225-2255.
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.
Very truly yours,
AAL VARIABLE PRODUCT SERIES FUND, INC.
Steven A. Weber, President
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AAL VARIABLE PRODUCT SERIES FUND, INC.
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
800-225-5225
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
of the AAL Variable Product International Stock Portfolio
To Be Held on August 14, 1998
A Special Meeting of the Shareholders ("Special Meeting") of the AAL
Variable Product International Stock Portfolio (the "Portfolio"), a series of
the AAL Variable Product Series Fund, Inc. (the "Fund"), will be held at 222
West College Avenue, Appleton, Wisconsin, on Friday, August 14, 1998, beginning
at 10:00 a.m. local time for the following purposes:
1. To approve, with respect to the Portfolio, a new Sub-Advisory
Agreement by and among the Fund, Aid Association for Lutherans ("AAL") and
Oechsle International Advisors, LLC ("Oechsle LLC"), pursuant to which Oechsle
LLC will replace Oechsle International Advisors L.P. ("Oechsle L.P.") as
sub-adviser to the Portfolio. The new Sub-Advisory Agreement is identical to the
existing Sub-Advisory Agreement (other than with respect to the commencement
date and the change of sub-adviser from Oechsle L.P. to Oechsle LLC), and does
not change the fees paid to the sub-adviser, the Portfolio's investment
objective, policies and strategies or the composition of the sub-adviser's
portfolio management team responsible for making investment decisions for the
Portfolio. A copy of the new Sub-Advisory Agreement is attached as Appendix A to
the enclosed Proxy Statement; and
2. To transact any other business as properly may come before the
meeting, or adjournment thereof.
The Board of Directors has fixed the close of business on Tuesday, June
30, 1998, 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
and AAL Variable Life Account I (together the "Variable Accounts"), where the
shares are held to fund benefits under variable annuity certificates and
flexible premium variable universal life insurance certificates, (together the
"Certificates") issued by the Variable Accounts. As the owner of all of the
assets held in the Variable Accounts, AAL is the sole shareholder of each
Portfolio and is entitled to vote all of the shares of each Portfolio held in
the Variable Accounts. However, pursuant to applicable laws, the Fund's current
prospectus dated March 1, 1998, 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 Accounts. This Notice is being delivered to Certificate
Owners who, by virtue of their ownership of Certificate(s), owned beneficially
shares 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 the
AAL Variable Product Series Fund, Inc.
Kathleen A. Brost, Secretary
Appleton, Wisconsin
July 1, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE PROVIDED FOR THAT
PURPOSE.
<PAGE>
AAL VARIABLE PRODUCT INTERNATIONAL STOCK PORTFOLIO
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
800-225-5225
PROXY STATEMENT
The Proxy Statement was first mailed to
shareholders on or about July 8, 1998
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 a Special
Meeting of Shareholders (the "Special Meeting") of the AAL Variable Product
International Stock Portfolio ("Portfolio") to be held on Friday, August 14,
1998. The Portfolio issues and sells its shares to AAL Variable Annuity Account
I and AAL Variable Life Account I (together the "Variable Accounts"), where the
shares are held to fund benefits under variable annuity certificates and
flexible premium variable universal life insurance certificates (the
"Certificates") issued by AAL in the Variable Accounts.
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 9,800 local AAL branches
throughout the U.S.
As the owner of all of the assets held in the Variable Accounts, AAL is
the sole shareholder of the Portfolio and is entitled to vote all of the shares
of the Portfolio held in the Variable Accounts. However, pursuant to applicable
laws, the Fund's current prospectus dated March 1, 1998, 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 Accounts. This Proxy Statement and
the accompanying Notice of Special Meeting of Shareholders 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 Tuesday, June
30, 1998 (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 of Proxy accompanying it.
Purpose
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve a new Sub-Advisory Agreement (the "New Sub-Advisory
Agreement") among the Fund (on behalf of the Portfolio), AAL, as the investment
adviser of the Portfolio, and Oechsle International Advisors, LLC, a Delaware
limited liability company ("Oechsle LLC"). On or about October 1, 1998, Oechsle
International Advisors L.P. (Oechsle L.P.), a Delaware limited partnership, will
be reorganized into Oechsle LLC, which will thereafter conduct the business that
Oechsle L.P. conducted prior to that time. Approval by the Portfolio's
shareholders of the New Sub-Advisory Agreement is required because such a change
in ownership could be deemed a change of control, which in turn would be deemed
an assignment of the current Sub-Advisory Agreement, resulting in its automatic
termination. Under provisions of the Investment Company Act of 1940 (the "1940
Act"), advisory contracts terminate automatically if assigned, and new advisory
contracts require shareholder approval. A change in control of an adviser is
deemed an assignment of the adviser's advisory contracts.
Under the New Sub-Advisory Agreement, Oechsle LLC would serve as
sub-adviser to the Portfolio on terms and conditions identical to those of the
Current Sub-Advisory Agreement (other than with respect to the commencement date
and the change of sub-adviser from Oechsle L.P. to Oechsle LLC) pursuant to
which Oechsle L.P. presently provides sub-advisory services to the Fund. See
"Proposal 1 - Approval of New Sub-Advisory Agreement" on page 4.
No other business is scheduled to be transacted.
Quorum and Voting
The representation at the Special 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 New Sub-Advisory Agreement must be
approved by a majority of the Portfolio's 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 New
Sub-Advisory Agreement.
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 and any
shares held by AAL, its subsidiaries or affiliates for its own account 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 Portfolio's New Sub-Advisory Agreement.
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 New Sub-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 New Sub-Advisory Agreement. 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 appropriate 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 June 30, 1998, will be entitled to one vote on each matter presented
for each share so represented. At that date, there were 201,213.235 shares of
the Portfolio outstanding. At the Portfolio's inception, AAL purchased one
million shares. As of the close of business on June 30, 1998, AAL will vote the
shares as described in this proxy.
UPON REQUEST AND AT NO COST TO A REQUESTING CERTIFICATE OWNER, THE FUND
WILL MAIL, BY FIRST CLASS MAIL, COPIES OF ITS ANNUAL REPORT DATED DECEMBER 31,
1997. REQUESTS SHOULD BE DIRECTED TO THE ATTENTION OF THE AAL VARIABLE PRODUCTS
SERVICE CENTER AT 4321 NORTH BALLARD ROAD, APPLETON, WISCONSIN 54919-0001,
TELEPHONE 800-225-5225.
<PAGE>
PROPOSAL 1 - APPROVAL OF NEW SUB-ADVISORY AGREEMENT
Background
The Special Meeting has been called for the purpose of considering the
approval of the New Sub-Advisory Agreement for the Portfolio. Oechsle L.P. plans
to engage in a restructuring described in more detail below (the "Transaction").
The Transaction will change Oechsle L.P.'s ownership structure, and may be
deemed a change in control of Oechsle. Such a change in control in turn may be
deemed a technical assignment of the existing Sub-Advisory Agreement by and
among the Fund, AAL and Oechsle L.P., dated February 12, 1998 (the "Current
Sub-Advisory Agreement"), from Oechsle L.P. to Oechsle LLC. Under provisions of
the 1940 Act, the Current Sub-Advisory Agreement will terminate automatically
upon effectiveness of any such change in control that is deemed to be an
assignment of such agreement. See "Description of the Transaction."
In order to eliminate any uncertainty about Oechsle LLC's ability to
provide advisory services to the Portfolio following the Transaction, it is
necessary for the Fund (on behalf of the Portfolio), AAL and Oechsle LLC to
enter into a New Sub-Advisory Agreement (the "New Sub-Advisory Agreement"). The
New Sub-Advisory Agreement will have terms and conditions (including the rate of
compensation to be paid to Oechsle LLC thereunder) identical to those of the
Current Sub-Advisory Agreement (except with respect to the effective date and
the replacement of Oechsle L.P. with Oechsle LLC). Provisions of the 1940 Act
require that the New Sub-Advisory Agreement must be approved by the shareholders
of the Portfolio. Accordingly, Certificate Owners are being asked to instruct
AAL with respect to approval of the New Sub-Advisory Agreement. The New
Sub-Advisory Agreement will take effect only if the restructuring of the
sub-adviser occurs and a majority limited partner in Oechsle L.P. sells its
partnership interest, and subject to approval by shareholders of the Portfolio.
A copy of the New Sub-Advisory Agreement is attached as Appendix A to this Proxy
Statement.
Description of Current Sub-Advisory Agreement
AAL and the Fund retained Oechsle L.P. to serve as the sub-adviser to
the Portfolio under the terms of the Current Sub-Advisory Agreement.
Shareholders of the Portfolio previously have not been required to vote on
approval of the Current Sub-Advisory Agreement.
Under the Current Sub-Advisory Agreement, Oechsle L.P., subject to the
direction and control of AAL and the Board of Directors of the Fund, determines
the securities that will be purchased or sold by the Portfolio, arranges for
their purchase and sale and renders other assistance to AAL in formulating and
implementing the investment program of the Portfolio. Oechsle L.P. furnishes or
pays for all facilities, equipment and supplies required for it to carry out its
duties under the Current Sub-Advisory Agreement, including, but not limited to,
office space, office equipment, furnishings and personnel. Under the Current
Sub-Advisory Agreement, Oechsle L.P. receives a fee, which is calculated daily
and paid quarterly out of the fee paid to the Adviser under the Advisory
Agreement, at an annual rate of 0.54 of 1% of the Portfolio's average daily net
assets of $20 million or less, 0.45 of 1% of the Portfolio's average daily net
assets between $20 million and $50 million, and 0.36 of 1% of the Portfolio's
average daily net assets over $50 million. Because the Portfolio first commenced
operations on March 1, 1998, no sub-advisory fees were paid to Oechsle L.P. in
1997.
Unless earlier terminated as described below, the Current Sub-Advisory
Agreement provides that it will remain in effect from year to year only so long
as such continuance is specifically approved at least annually in the manner
required under the 1940 Act. The 1940 Act provides that the requisite approval
shall be deemed to have been obtained only if the Current Sub-Advisory Agreement
is specifically approved at least annually: (i) by the vote of a majority of the
Fund's Directors who are not parties to the Current Sub-Advisory Agreement or
"interested persons" (as defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval; and (ii)
either by the vote of a majority of the entire Board of Directors or by the vote
of the holders of a "majority" (as defined in the 1940 Act) of the outstanding
voting securities of the Fund.
The Current Sub-Advisory Agreement may be terminated by the Sub-Adviser
at any time without penalty upon giving the Fund and AAL sixty (60) days written
notice, and may be terminated by the Fund or AAL at any time without penalty
upon giving the sub-adviser sixty (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 the Fund. In
addition, the Current Sub-Advisory Agreement automatically terminates in the
event of its "assignment" (as defined in the 1940 Act to include assignment in
connection with certain transactions affecting the sub-adviser, which may
include the Transaction) and in the event that the Advisory Agreement is
terminated. If the Current Sub-Advisory Agreement is terminated, the approval of
the shareholders of the Fund is required to enter into a new agreement with
respect to the Fund.
Description of New Sub-Advisory Agreement
The New Sub-Advisory Agreement differs from the Current Sub-Advisory
Agreement only with respect to its effective date and the replacement of Oechsle
L.P. with Oechsle LLC. In all other respects, the New Sub-Advisory Agreement and
the Current Sub-Advisory Agreement are identical. The effective date is
described under "Description of the Transaction" on page 6.
The New Sub-Advisory Agreement, like the Current Sub-Advisory
Agreement, provides that Oechsle LLC (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with Oechsle LLC as a party) shall not be liable to the Fund or its
shareholders for any loss suffered as a consequence of any act or omission of
Oechsle LLC or any of the foregoing related parties or entities in connection
with the New Sub-Advisory Agreement except by reason of its willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations under the New Sub-Advisory Agreement.
<PAGE>
Approval Required
In order to be approved, the New Sub-Advisory Agreement must receive
the affirmative vote of at least a majority of the outstanding shares of the
Portfolio, or if less, 67% of the shares represented at a meeting of
shareholders at which the holders of more than 50% of the outstanding shares of
the Portfolio are present or represented by proxy.
Approval of the New Sub-Advisory Agreement by the shareholders of the
Portfolio will remain valid for a period of two years following the Special
Meeting. If no Transaction occurs within that time, shareholder approval of the
New Sub-Advisory Agreement would have to be resolicited in order for Oechsle LLC
to continue providing sub-advisory services to the Portfolio pursuant to the New
Sub-Advisory Agreement following a change-in-control transaction occurring after
that time.
Description of the transaction
Current Structure of the Sub-Adviser. Oechsle L.P. is a Delaware limited
partnership. Its sole general partner is Oechsle Group, L.P., a Delaware limited
partnership ("Group L.P."). Walter Oechsle, as Managing General Partner of Group
L.P., is the chief executive officer of Oechsle L.P. and Group L.P. In addition
to Mr. Oechsle, the following persons are general partners of Group L.P.: S.
Dewey Keesler, Jr., L. Sean Roche, Stephen P. Langer, Steven H. Schaefer, Warren
Walker and Andrew S. Parlin. The principal occupation of all of the general
partners of Group L.P. is as a partner of Group L.P. and officer of Oechsle L.P.
The address of Oechsle L.P., Group L.P. and each general partner of Group L.P.
is One International Place, Boston, Massachusetts 02110.
Dresdner Asset Management (U.S.A.) Corporation ("DAMCO") currently owns
a majority limited partnership interest in Oechsle L.P. DAMCO is a wholly owned
subsidiary of Dresdner Bank AG. DAMCO's address is 75 Wall Street, New York, New
York 10005. The address of Dresdner Bank AG is Jurgen-Ponto-Plarz 1 60301,
Frankfurt am Main, Germany.
Certain Ownership Changes Effected by the Transaction. As part of the
Transaction, Oechsle L.P. will be reorganized into Oechsle LLC, which will
thereafter conduct the business that Oechsle L.P. conducted prior to that time.
Also as part of the Transaction, (1) the seven general partners of Group L.P.
will approximately double their current collective ownership interest in the
sub-adviser, (2) Dresdner Bank AG will sell the stock of DAMCO to Fleet
Financial Group, Inc. ("Fleet"), which will thereafter hold approximately a 35%
interest (on a fully diluted basis) in Oechsle LLC. Fleet's interest will not
constitute voting securities. Dresdner Bank AG no longer will hold any interest
in the restructured sub-adviser.
Structure Following the Transaction. Oechsle LLC will be a Delaware limited
liability company. Its Member Manager will be Oechsle Group, LLC, a Delaware
limited liability company ("Group LLC") which will own approximately a 44%
interest (on a fully diluted basis) in Oechsle LLC. The seven current general
partners of Group L.P. will collectively own approximately an 89% interest (on a
fully diluted basis) in Group LLC. The management, policies and control of
Oechsle LLC will, subject to certain limitations, be vested exclusively in Group
LLC. Day-to-day management of Oechsle LLC will be exercised by the Management
Committee of Group LLC, which will consist of Messrs. Keesler, Roche, Langer,
Walker and Parlin. Mr. Keesler will be the Chief Investment Officer of Oechsle
LLC and a Portfolio Manager/Research Analyst with responsibility for
coordinating Oechsle LLC's investment activities. Mr. Langer is a Member Manager
and the Director of Marketing with responsibility for the organization's
business development. Messrs. Schaefer, Walker and Parlin will be Portfolio
Managers for Oechsle LLC.
The address of Oechsle LLC and Group LLC is One International Place,
Boston, Massachusetts 02110. The address of Fleet is One Federal Street, Boston,
Massachusetts 02110.
Consummation of the Transaction is subject to the satisfaction of a
number of conditions. It is currently expected that the Transaction will be
effected on or about October 1, 1998.
Consequences of the Transaction
The Current Sub-Advisory Agreement automatically terminates in the
event of its "assignment," as defined in the 1940 Act. An assignment includes
any direct or indirect transfer of a controlling interest in the assigning
party's outstanding voting securities. The Transaction would lead to a change of
control of Oechsle L.P., which may be deemed to constitute an assignment of the
Current Sub-Advisory Agreement under the 1940 Act, resulting in its automatic
termination. In order for Oechsle LLC to provide sub-advisory services to the
Portfolio following any such assignment, AAL (on behalf of the Portfolios),
Oechsle LLC and the Fund must enter into the New Sub-Advisory Agreement. The
1940 Act prohibits any person from providing advisory or sub-advisory services
to an investment company for a fee, except pursuant to a written agreement
approved by shareholders of the fund.
It is anticipated that the Transaction will not be effected until after
shareholder approval of the New Sub-Advisory Agreement is obtained. Subject to
such approval, the New Sub-Advisory Agreement would become effective with the
consummation of the Transaction.
If the New Sub-Advisory Agreement is not approved by the shareholders
of the Portfolio, the Directors would consider what course of action to pursue
with respect to the Portfolio. Such course of action could involve seeking to
engage Oechsle LLC to provide investment management services on an interim basis
(subject to any required regulatory action) during the period required to obtain
approval by shareholders of the New Sub-Advisory Agreement or another
sub-advisory agreement with Oechsle LLC, having AAL assume responsibilities for
the management of the assets of the Portfolio pursuant to the Advisory
Agreement, or seeking to make other arrangements for obtaining such services
from another source, as the Directors of the Fund consider appropriate. If the
Transaction is not consummated for any reason, then the Current Sub-Advisory
Agreement will continue in full force and effect unless and until terminated in
accordance with its terms.
Compliance with Section 15(f) of the 1940 Act
Section 15(f) of the 1940 Act permits Oechsle L.P. or any of its
affiliates to receive compensation or a benefit in connection with a
change-in-control transaction, provided two conditions are satisfied.
First, no unfair burden may be imposed on the Portfolio as a result of
the transaction or any expressed or implied terms, conditions or understandings,
applicable thereto. The term "unfair burden," as defined in the 1940 Act,
includes any arrangement during the two-year period after the Transaction
whereby Oechsle LLC (or any predecessor or successor sub-adviser), or any
interested person of Oechsle LLC or of such predecessor or successor
sub-adviser, receives or is entitled to receive any compensation, directly or
indirectly from the Portfolio or its security holders (other than fees for bona
fide sub-advisory or other services) or from any person in connection with the
purchase or sale of securities or any property to, from, or on behalf of the
Portfolio (other than fees for bona fide principal underwriting services).
Representatives of Oechsle L.P. have confirmed that no such compensation
arrangements are contemplated in connection with the Transaction.
The second condition is that, during the three-year period immediately
following consummation of the Transaction, at least 75% of the Fund's Board of
Directors must not be "interested persons" (as that term is defined in the 1940
Act) of Oechsle LLC. None of the members of the Fund's Board of Directors
currently are "interested persons" with respect to Oechsle L.P., nor are they
expected to be interested persons of Oechsle LLC following the Transaction.
Accordingly, it is contemplated that the conditions of Section 15(f) of the 1940
Act will be met in connection with the Transaction.
Information Concerning Oechsle L.P./Oechsle LLC
Oechsle International Advisors, L.P., One International Place, Boston,
Massachusetts 02110, is the current sub-adviser to the Portfolio. Oechsle L.P.
is a Delaware limited partnership and is registered with the SEC as an
investment adviser. Oechsle International Advisors, LLC, One International
Place, Boston, Massachusetts 02110, is the proposed sub-adviser to the Portfolio
subsequent to the reorganization of Oechsle L.P. into a limited liability
company. Oechsle LLC will be a Delaware limited liability company and will be
registered with the SEC as an investment adviser.
Portfolio Managers. Kathleen Harris and Sean Roche have managed the
investments of the Portfolio since its inception on March 1, 1998. Both Ms.
Harris and Mr. Roche are employees of Oechsle L.P. They consult with other
portfolio managers and research analysts employed by Oechsle L.P. in connection
with managing the Portfolio's assets, but they are responsible for making all
investment decisions. Biographical information for Ms. Harris and Mr. Roche is
set forth below.
Kathleen Harris is a Partner and Portfolio Manager/Research Analyst.
She is a co-manager of the AAL Variable Product International Stock Portfolio.
Prior to joining Oechsle in January 1995, Ms. Harris was Portfolio Manager and
Investment Director for the State of Wisconsin Investment Board, where she
managed the fund's international equity assets. Previously, she was a Fund
Manager and Equity Analyst for the Northern Trust Company.
Ms. Harris received a M.B.A. in Finance from the University of Chicago
Graduate School of Business and a B.S. (Honors) in Finance from the University
of Illinois. She is a Chartered Financial Analyst.
L. Sean Roche is a Partner and a Portfolio Manager/Research Analyst.
Sean is a co-manager of the AAL Variable Product International Stock Portfolio.
He has over twenty-one years of international investment experience. Prior to
forming Oechsle, Mr. Roche was a Vice President and Portfolio Manager for Putnam
International Advisors. Previously, he was associated with Rowe Rudd & Company
and James Capel & Company in London, where he worked as a technology analyst.
Mr. Roche holds a B.Sc. Econ. (Hons) from the London School of Economics.
He studied investment analysis and management at the City University Business
School and the City of London Polytechnic.
Sub-Advisory Services. Oechsle L.P. acts as sub-adviser to several other
mutual funds that have investment objectives similar to the Fund's. Appendix B
attached hereto sets forth the name and asset size of these other mutual funds
and the rate of Oechsle's compensation as sub-adviser to each of them.
Services Rendered by Oechsle L.P. to the Portfolio. Oechsle L.P.,
o Obtains and evaluates pertinent economic, statistical, financial
and other information affecting the economy generally and
individual issuers or industries the securities of which are
included in the Portfolio or are under consideration for the
inclusion in the Portfolio;
o Formulates and implements a continuous investment program for the
Portfolio consistent with its investment objectives and relevant
investment policies as described in the prospectus;
o Takes actions to implement the Portfolio's investment program by
the purchase and sale of securities, including the placing of
orders for such purchases and sales; and
o Regularly reports with respect to the implementation of the
Portfolio's investment program.
Beyond the performance of these contractual services, Oechsle L.P. has
provided assistance in the marketing and client servicing of the portfolio. In
general, this assistance has taken the form of meetings and conference calls
between one or more of Oechsle's investment staff with wholesalers,
brokers/dealers, and/or the clients of brokers/dealers.
Directors' Considerations and Recommendation
In considering the New Sub-Advisory Agreement, the Board of Directors
carefully evaluated a number of relevant factors, including but not limited to:
(1) a comparison of the fees and expense ratios (including advisory fees) of the
Portfolio to those of other mutual funds; (2) the historical performance of the
Portfolio; (3) the nature and quality of the services that have been rendered
and are expected to be rendered to the Fund by Oechsle L.P. and its successor;
(4) the distinct investment objectives and policies of the Fund; (5) the fact
that the compensation payable to Oechsle LLC under the New Sub-Advisory
Agreement will be at the same rate as the compensation payable to Oechsle L.P.
under the Current Sub-Advisory Agreement; (6) the fact that the terms of the New
Sub-Advisory Agreement will be substantively identical to those of the Current
Sub-Advisory Agreement; (7) the history, reputation, qualification and
background of Oechsle L.P., as well as the qualifications of its personnel and
their respective operations and financial condition; (8) the portfolio managers'
investment performance record; (9) the absence of any special or inappropriate
benefits that would be obtained by Oechsle L.P. and its affiliates from the
relationship, including a consideration of soft dollar arrangements; (10) the
consequences of the Transaction on Oechsle LLC's management and operations; and
(11) other factors deemed relevant by the Board. The Board of Directors has been
advised that the Transaction would have no effect on the management, operations
or personnel of the Sub-Adviser or the services rendered to the Portfolio.
Based upon these considerations, the Board has determined that it would
be in the best interests of the Portfolio to have Oechsle LLC serve as the
Fund's sub-adviser following the Transaction. The Board of Directors has further
determined that the terms of the New Sub-Advisory Agreement are fair to, and in
the best interests of, the Portfolio and its shareholders.
Accordingly, the Board of Directors, none of whom is an "interested
person" of Oechsle L.P. or Oechsle LLC, unanimously recommends that shareholders
of the Portfolio vote "FOR" approval of the New Sub-Advisory Agreement.
PROPOSAL 2 - 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.
ADDITIONAL INFORMATION
Adviser and Administrator
Aid Association for Lutherans ("AAL") is the Adviser to the Portfolio.
AAL Capital Management Corporation, a wholly owned subsidiary of AAL, performs
certain administrative services including accounting, expense accrual, valuation
and financial reporting, and tax accounting services for the Portfolio.
Auditors
The firm of Ernst & Young, LLP serves as the Funds' independent
accountants and auditors. Ernst & Young, LLP has no direct or indirect financial
interest in AAL or the Fund except as auditors and independent public
accountants. No representative of Ernst & Young, LLP is expected to be present
at the Special Meeting.
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 Portfolio. Through their
ownership of Certificates, the Fund's Directors owned beneficially 0 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 214.6212 shares (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 AAL, 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 Oechsle L.P. No such costs will be borne by the Fund.
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 any the proposal.
<PAGE>
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 (or of any Portfolio) will be held when
and as determined necessary by the Board of Directors of the Fund and in
accordance with the 1940 Act. 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 54919-0001, Attention: Kathleen A. Brost, Secretary.
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC.
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald G. Anderson, Robert G. Same and Kathleen
A. Brost, or any of them, proxy, with full power of substitution, to represent
and vote, as designated below, all shares of stock the undersigned is entitled
to vote at the Special Meeting of Shareholders of the AAL Variable Product
International Stock Portfolio of the AAL Variable Product Series Fund, Inc., to
be held at 222 West College Avenue, Appleton, Wisconsin 54919 on Friday, August
14, 1998, beginning at 10:00 a.m. local time, or at any adjournment thereof,
with respect to the matters set forth below and described in the Notice of
Special Meeting and Proxy Statement, dated July 1, 1998, receipt of which is
hereby acknowledged.
DATED:_________________________________________, 1998
_________________________________________
(Please sign exactly as name appears at left)
_________________________________________
(If stock is owned by more than one person, all owners
should sign. Persons signing as executors, administrators,
trustees or in similar capacities should so indicate.)
* * * * *
Please place an "X" on the desired blank for each Item. Shares represented by
this proxy will be voted as directed by the shareholder. IF NO DIRECTION IS
SUPPLIED, THE PROXY WILL BE VOTED FOR PROPOSAL 1.
<PAGE>
PROPOSAL 1: APPROVAL OF NEW SUB-ADVISORY AGREEMENT
o For o Against o Abstain
PROPOSAL 2: OTHER BUSINESS
<PAGE>
APPENDIX A
Form of New Sub-Advisory Agreement
THE AAL VARIABLE PRODUCT SERIES FUND, INC.
SUB-ADVISORY AGREEMENT FOR THE
AAL VARIABLE PRODUCT INTERNATIONAL STOCK PORTFOLIO
WITH
OECHSLE INTERNATIONAL ADVISORS, LLC
AGREEMENT made this 14th day of August, 1998, by and among the AAL VARIABLE
PRODUCT SERIES FUND, INC. (the "Fund"), a Maryland corporation, AID ASSOCIATION
FOR LUTHERANS (the "Adviser"), a Wisconsin corporation and OECHSLE INTERNATIONAL
ADVISORS, LLC (the "Sub-Adviser"), a Delaware limited liability corporation.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. In General
The Sub-Adviser agrees, as more fully set forth herein, to act as
Sub-Adviser to the Fund with respect to the investment and reinvestment of the
assets of the Fund's series of shares described as the AAL Variable Product
International Stock Portfolio (the "International Stock Portfolio"). It is
understood that the Fund may create one or more additional Fund series from time
to time and that this Agreement may be amended by the mutual written agreement
of the parties to include such additional Portfolio(s) under the terms to this
Agreement.
2. Duties and Obligations of the Sub-Adviser with Respect to Investment
of Assets of the International Stock Portfolio
(a) Subject to the succeeding provisions of this section and subject to the
oversight and review of the Adviser and the direction and control of the Board
of Directors ("Directors") of the Fund, the Sub-Adviser, as agent and
attorney-in-fact with respect to the Fund, is authorized, in its discretion and
with prior consultation with the Fund to:
(i) Buy, sell, exchange, convert, lend and otherwise trade in any
stocks, bonds, currencies, and any other securities or assets;
(ii) Place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through
such brokers, dealers, underwriters or issuers as the Sub-Adviser may
select; including brokers and dealers that may be affiliates of the
Sub-Adviser, and
(iii) Enter into and execute agreements on behalf of the Fund,
relating to the acquisition or disposition of investment assets and the
execution of portfolio transactions, including foreign exchange contracts
and other transactional agreements. Nothing contained herein, however,
shall be deemed to authorize the Sub-Adviser to take or receive physical
possession of any cash or securities held for the Fund, it being intended
that sole responsibility for safekeeping thereof and the consummation of
all such purchases, sales, deliveries, and investments made pursuant to the
Sub-Adviser's direction shall rest upon the Fund's Custodian.
<PAGE>
(iv) Provide the Adviser and the Directors with such reports as may
reasonably be requested in connection with the discharge of the foregoing
responsibilities and the discharge of the Adviser's responsibilities under
the Investment Advisory Agreement with the Fund and those of AAL Capital
Management Corporation (the "Distributor") under the Primary Underwriting
Agreement with the Fund.
Written procedures with respect to (i), (ii) and (iii) above may be set
forth as agreed to among the Fund, the Adviser and Sub-Adviser.
(b) Any investment purchases or sales made by the Sub-Adviser under this
section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment Company Act of
1940 (the "Act") and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the Articles of
Incorporation and By-Laws of the Fund as amended from time to time; (4) any
policies and determinations of the Board of Directors of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its Registration Statement
under the Act, or as amended by the shareholders of the Fund; provided that
copies of the items referred to in clauses (3), (4) and (5) shall have been
furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best judgment
and effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties ("disabling conduct") hereunder on the part of the
Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Sub-Adviser) the Sub-Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of, or
connected with rendering services hereunder, including without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36 (b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Fund shall indemnify the
Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Sub-Adviser) against any liability arising from the Sub-Adviser's conduct under
this Agreement to the extent permitted by the Articles of Incorporation and
applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any
"affiliated person" (as defined in the Act) of the Sub-Adviser from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way limit or restrict the Sub-Adviser or any such affiliated
person from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however, that the Sub-Adviser expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement. It is agreed
that the Sub-Adviser shall have no responsibility or liability for the accuracy
or completeness of the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information supplied by the Sub-Adviser for
inclusion therein. The Sub-Adviser shall be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, have no
authority to act or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
(e) In connection with its duties to arrange for the purchase and sale of
the International Stock Portfolio's securities and other assets, the Sub-Adviser
shall follow the principles set forth in any investment advisory agreement in
effect from time to time between the Fund and the Adviser, provided that a copy
of any such agreement shall have been provided to the Sub-Adviser. The
Sub-Adviser will promptly communicate to the Adviser and to the officers and the
Directors of the Fund such information relating to portfolio transactions as
they may reasonably request.
(f) The Sub-Adviser may place orders both as to sales and purchases of
assets directly through any broker or dealer it chooses. Brokers or dealers may
be selected who provide brokerage and/or research services to the Fund and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Brokers or dealers who execute portfolio transactions on behalf of
the Fund may receive commissions which are in excess of the amount of
commissions which other brokers or dealers would have charged for effecting such
transactions. In order to cause the Fund to pay such higher commissions, the
Sub-Adviser must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and/or research services provided by such
executing brokers or dealers viewed in terms of a particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other discretionary
client accounts.
(g) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
The Sub-Adviser may purchase or sell for the Fund, pursuant to the Fund's
Rule 10f-3 Procedures, any security (including securities of the same class as
those underwritten or other securities of the same or related issuer) for which
any affiliate of the Sub-Adviser acts as (1) an underwriter (either as lead
underwriter or syndicate member), both during the pendency of any underwriting
or selling syndicate and thereafter, or (2) a market maker, provided that such
security is purchased from a non-affiliated party.
(h) The Sub-Adviser shall be responsible for 13F reporting for the
securities held by the International Stock Portfolio.
3. Allocation of Expenses
During the term of this Agreement, the Sub-Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities, commodities, and other investments (including brokerage
commissions and other transaction charges, if any) purchased for the Fund.
The Sub-Adviser agrees that it will furnish the Fund, at the Sub-Adviser's
expense, with all office space, facilities, equipment, and clerical personnel
necessary for carrying out its duties under this Agreement.
4. Certain Records
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 under the Act that are prepared or
maintained by the Sub-Adviser on behalf of the Fund are the property of the Fund
and will be surrendered promptly to the Fund or Adviser on request.
5. Reference to the Sub-Adviser
Neither the Fund, the Adviser or any affiliate or agent thereof shall make
reference to or use the name of the Sub-Adviser or any of its affiliates in any
advertising or promotional materials without the prior approval of the
Sub-Adviser, which approval shall not be unreasonably withheld.
6. Compensation of the Sub-Adviser
The Adviser agrees to pay the Sub-Adviser and the Sub-Adviser agrees to
accept as full compensation for all services rendered by the Sub-Adviser as
such, a management fee, payable quarterly in arrears and computed on the average
daily net asset value of the International Stock Portfolio at rates shown on
Exhibit A attached hereto.
7. Duration and Termination
(a) This Agreement shall go into effect for the International Stock
Portfolio on the date the transfer of ownership between Oechsle International
Advisors, L.P. and Oechsle International Advisors, LLC takes place, and shall,
unless terminated as hereinafter provided, continue in effect thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by a majority of the Fund's Board of Directors, or by the vote of
the holders of a "majority" (as defined in the Act) of the outstanding voting
securities of the Fund, with respect to the International Stock Portfolio, and,
in either case, 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.
(b) This Agreement may be terminated by the Sub-Adviser at any time without
penalty upon giving the Fund and the Adviser sixty (60) days' written notice
(which notice may be waived by the Fund and Adviser) and may be terminated by
the Fund or the Adviser at any time without penalty upon giving the Sub-Adviser
sixty (60) days' written notice (which notice may be waived by the Sub-Adviser),
provided that such termination by the Fund shall be directed or approved by the
vote of a majority of all of the Directors in office at the time or by the vote
of the holders of a majority (as defined in the Act) of the voting securities of
the Fund, with respect to the International Stock Portfolio, or with respect to
any Fund by the vote of a majority of the outstanding shares of such Fund. This
Agreement shall automatically terminate in the event of its "assignment" (as
defined in the Act). This Agreement will also terminate in the event that the
Investment Advisory Agreement is terminated.
8. Agreement Binding Only On Fund Property
The Sub-Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Fund personally, but bind only the Fund's
property; the Sub-Adviser represents that it has notice of the provisions of the
Fund's Articles of Incorporation disclaiming shareholder liability for acts or
obligations of the Fund.
9. Action By Individual Portfolio
The provisions of this Agreement and any amendments hereto with respect to
a Portfolio may be approved by the shareholders of that Portfolio and become
effective with respect to the assets of that Portfolio without the necessity of
approval thereof by shareholders of any other Portfolio. The Adviser represents
that the holders of a majority (as defined in the "Act") of the International
Stock Portfolio, will approve the entry into this Agreement on behalf of the
Portfolio.
10. Notices
(a) The Sub-Adviser agrees to promptly notify the Adviser of the occurrence
of any of the following events:
(1) any change in any of the Sub-Adviser's members or portfolio
managers;
(2) the Sub-Adviser fails to be registered as an investment adviser
under the Advisers Act or under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an
investment adviser in order to perform its obligations under this
Agreement;
(3) the Sub-Adviser is the subject of any action, suit, proceeding,
inquiry or investigation at law or in equity, before any court,
public board or body, involving the affairs of the International
Stock Portfolio, or
(4) any change in ownership or control, or membership of the
Sub-Adviser.
(b) Any notice given hereunder shall be in writing and may be served by
being sent by telex, facsimile or other electronic transmission, or sent by
registered mail or by courier to the address set forth below for the party for
which it is intended. A notice served by mail shall be deemed served seven days
after mailing and in the case of telex, facsimile or other electronic
transmission, twelve hours after confirmed receipt thereof. Addresses for notice
may be changed by written notice to the other party.
<PAGE>
The Adviser
John Gilbert, President and Chief Executive Officer
Aid Association For Lutherans
4321 North Ballard Road
Appleton, WI 54919-0001
Fax (920) 730-3746
The Sub-Adviser
Stephen Langer
Oechsle International Advisors, LLC
One International Place
Boston, MA 02110
Fax (617) 330-8620
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by both parties.
The Adviser acknowledges receipt of the Sub-Adviser's Part II, Form ADV at
least 48 hours in advance of signing this Agreement.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule, or otherwise, the
remainder of this Agreement shall not be affected thereby.
This Agreement shall be governed by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
ATTEST: THE AAL VARIABLE PRODUCT
SERIES FUND, INC.
- ---------------------- ---------------------------
Kathleen A. Brost, Secretary Steven A. Weber, President
ATTEST: AID ASSOCIATION FOR
LUTHERANS
- ---------------------- ---------------------------
Woodrow E. Eno, Senior Vice John O. Gilbert, President and
President, General Counsel Chief Executive Officer
and Secretary
ATTEST: OECHSLE INTERNATIONAL
ADVISORS, LLC by its Managing
Member, OECHSLE GROUP, LLC
- ----------------------- ----------------------------
L. Sean Roche, Member Manager
<PAGE>
EXHIBIT A
TO
THE AAL VARIABLE PRODUCT SERIES FUND
SUB-ADVISORY AGREEMENT
(Dated September 1, 1998)
1. The AAL Variable Product International Stock Portfolio
The management fee for this Portfolio, payable to the Sub-Adviser by the
Adviser, calculated in accordance with paragraph 6 of The AAL Variable Product
Series Fund Sub-Advisory Agreement, shall be at the annual rate of :
0.54 of 1% of the Portfolio's average daily net assets of $20 million
or less;
0.45 of 1% of the Portfolio's average daily net assets between $20
million and $50 million;
0.36 of 1% of the Portfolio's average daily net assets over $50
million.
<PAGE>
APPENDIX B
Oechsle International Advisors, L.P.
Mutual Fund Contract Renewal Information
Management Fee Schedules for Sub-Advisory Relationships:
AAL Variable Product International Stock Portfolio, a Portfolio of the AAL
Variable Product Series Fund, Inc.
<TABLE>
Approximate
Assets Under Oechsle L.P.
Fee Schedule Management as of Management Fee
3/31/98 from
(millions) 1/1/98 - 3/31/98
<CAPTION>
<S> <C> <C> <C>
1st $20 million 0.54% $11 $4,268
Next $30 million 0.45%
Over $50 million 0.36%
The International Equity Fund, a portfolio of the Galaxy Fund (Fleet Bank)
1st $50 million 0.40% $384 $304,264
Over $50 million 0.35%
The Jamestown International Equity Fund, a series of the Williamsburg Investment Trust
All Assets 0.50% $42 $46,873
The MMA Praxis International Fund, a series portfolio of the MMA Praxis Mutual Fund
All Assets 0.50% $22 $23,845
International Fund, a portfolio of Frank Russell Investment Company
1st $50 million 0.40% $209 $173,956
Next $600 million 0.35%
Over $650 million 0.30%
International Securities Fund, a portfolio of Frank Russell Investment Company
1st $50 million 0.40% $178 $148,409
Next $600 million 0.35%
Over $650 million 0.30%
International Equity Investments, a portfolio of Consulting Group Capital Markets Funds, Ltd.
(a Smith Barney managed fund)
All Assets 0.40% $626 $550,846
</TABLE>
