SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss. 240.14a-11(c) orss. 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:
AAL VARIABLE PRODUCT SERIES FUND, INC.
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
800-225-5225 or 920-734-5721
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[Logo]
AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL Variable Product High Yield Bond Portfolio
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
800-225-5225 or 920-734-5721
______________, 2000
Dear Shareholder:
Re: SPECIAL MEETING OF SHAREHOLDERS
Enclosed is a notice of a Special Meeting of Shareholders of the AAL
Variable Product High Yield Bond Portfolio (the "Fund"), to be held at 10:00
a.m. on June 21, 2000, together with a Proxy Statement and Form of Proxy
relating to the business to be transacted at the meeting. This Special Meeting
of Shareholders is being called for the reasons listed below.
PURPOSE
The purpose of the Special Meeting is to consider and vote upon the
Board of Director's recommendation that the Fund and its investment adviser, AAL
Capital Management Corporation ("AAL CMC"), engage Pacific Investment Management
Company ("PIMCO") as the sub-adviser to manage the investment of the Fund's
assets. Approval by Fund shareholders of the new Sub-Advisory Agreement with
PIMCO is required by applicable law. The retention of PIMCO is being proposed
primarily for the following reasons:
1. The investment performance of the AAL Variable Product High Yield
Bond Portfolio has been below a level deemed acceptable by the
Directors and AAL CMC.
2. PIMCO is one of the country's largest money management firms and
has substantial experience in the management of high yield bond
portfolios.
3. PIMCO offers a high level of investment management services. The
engagement of PIMCO would not affect the overall fee that the
Fund pays for management services.
IF YOU HAVE ANY QUESTIONS OR CONCERNS THAT YOU WOULD LIKE TO DISCUSS
ABOUT THE MEETING AND THE MATTERS TO BE ACTED UPON, PLEASE CALL US AT
800-225-5225.
Thank you for your continued confidence in The AAL Variable Product
Series Fund, Inc. Your cooperation and participation in completing and returning
the enclosed proxy will ensure that your vote is counted.
Very truly yours,
THE AAL VARIABLE PRODUCT SERIES FUND, INC.
Robert G. Same, President
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AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL VARIABLE PRODUCT HIGH YIELD BOND PORTFOLIO
4321 NORTH BALLARD ROAD
APPLETON, WISCONSIN 54919-0001
800-225-5225 OR 920-734-5721
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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To Be Held on June 21, 2000
A Special Meeting of the Shareholders of the High Yield Bond Portfolio
(the "Fund") of AAL Variable Product Series Fund, Inc. (the "Company"), will be
held at 222 West College Avenue, Appleton, Wisconsin 54919, on June 21, 2000,
beginning at 10:00 a.m. local time for the following purpose:
1. To approve, with respect to the AAL Variable Product High Yield
Bond Portfolio, a new Sub-Advisory Agreement by and among AAL
Variable Product Series Fund, Inc. (on behalf of the Fund), AAL
Capital Management Corporation (the Fund's investment adviser),
and Pacific Investment Management Company ("PIMCO") (as
sub-adviser to the Fund). A copy of the Sub-Advisory Agreement is
attached as Appendix A to the accompanying Proxy Statement;
2. To transact such other business as properly may come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 28,
2000 as the record date for determining shareholders entitled to notice of, and
to vote at, the Special Meeting and any adjournment thereof. Only shareholders
of record at the close of business on that date will be entitled to vote. Your
attention is invited to the Proxy Statement accompanying this Notice for a more
complete statement regarding the matters to be acted upon at the Special
Meeting.
By Order of the Board of Directors of
AAL Variable Product Series Fund, Inc.
Robert G. Same, President
Appleton, Wisconsin
______________, 2000
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE PROVIDED FOR THAT PURPOSE.
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PROXY STATEMENT
AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL VARIABLE PRODUCT HIGH YIELD BOND PORTFOLIO
4321 North Ballard Road
Appleton, Wisconsin 54919-0001
1-800-225-5225 or 920-734-5721
This Proxy Statement was first mailed to
Shareholders on or about ______________, 2000
SOLICITATION AND VOTING
SOLICITATION
The enclosed Proxy is being solicited by the Board of Directors of AAL
Variable Product Series Fund, Inc. (the "Company") in connection with the
Special Meeting of Shareholders of its series known as the AAL Variable Product
High Yield Bond Portfolio (the "Fund") to be held at 10:00 a.m. on June 21, 2000
(the "Special Meeting"). As discussed in more detail in this Proxy Statement, we
are calling the Special Meeting to consider and vote on the approval of a
Sub-Advisory Agreement pursuant to which Pacific Investment Management Company
("PIMCO") would manage the investment of the Fund's assets, as sub-adviser to
the Fund, subject to the direction and control of AAL Capital Management
Corporation ("AAL CMC") and the Board of Directors. You are encouraged to read
carefully this Proxy Statement, including the Sub-Advisory Agreement attached as
Appendix A, and mark and return the proxy accompanying it.
The Fund is one of several series (or mutual funds) offered by the
Company. The Company is an investment company registered as an open-end,
management investment company. Shares of the Fund are sold to the AAL Variable
Annuity Account I, the AAL Variable Annuity Account II, the AAL Variable Life
Account I (together, the "Variable Accounts"), and the Aid Association for
Lutherans Savings Plan (the "AAL Plan"), a 401(k) plan for employees of Aid
Association for Lutherans ("AAL"). The shares are held in the Variable Account
and the trust created under the AAL Plan to fund benefits under individual
flexible premium deferred variable annuity certificates, individual single
premium immediate variable annuity certificates and flexible premium variable
life insurance certificates issued by Aid Association for Lutherans ("AAL") in
the Variable Accounts, and benefits payable to participants under the AAL Plan
("Plan Participants").
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As the record owner of all the assets held in the Variable Accounts and
in the AAL Plan, AAL is the sole shareholder of the Fund and is entitled to vote
all of the shares of the Fund held in the Variable Accounts and the AAL Plans.
However, pursuant to applicable laws, the Fund's current prospectus dated May 1,
2000, and the Company's Articles of Incorporation and Bylaws, AAL votes
outstanding shares of the Fund in accordance with instructions received from the
owners of the certificates ("Certificate Owners") issued in the Variable
Accounts and Plan Participants to whose accounts Fund shares have been allocated
under the terms for the AAL Plan. This Proxy Statement and the accompanying
Notice of Special Meeting of Shareholders and Form of Proxy are being delivered
to the Contract Owners and Plan Participants who, by virtue of their ownership
of one or more certificates or their participation in the AAL Plan, beneficially
owned shares of the Fund as of April 28, 2000 (together "Beneficial Owners"), so
that they may instruct AAL on how the Fund shares beneficially owned by them
should be voted on the matter to be acted upon at the Special Meeting.
You are encouraged to read carefully the Proxy Statement and mark and
return the proxy accompanying it.
QUORUM AND VOTING
The presence at the Special Meeting, in person or by proxy, of
shareholders representing one-third of all shares outstanding and entitled to
vote on a matter constitutes a quorum for the transaction of business.
Abstentions will be counted as present for purposes of determining a quorum, but
will not be counted as votes cast with respect to the proposal.
Approval of the Sub-Advisory Agreement requires the affirmative vote of
"a majority of the outstanding voting securities" of the Fund, defined under the
Investment Company Act of 1940 (the "1940 Act") to mean at least a majority of
the outstanding voting shares of the Fund or, if less, 67% of the voting shares
represented at a meeting at which the holders of 50% or more of the outstanding
voting shares of the Fund are present or represented by proxy. Thus abstentions
will have the same effect as votes cast against the proposal.
AAL, as the sole shareholder of the Fund, will submit a proxy for all
shares of the Portfolio owned of record by it as of April 28, 2000 (the "Record
Date"). Shares underlying certificates or held in Plan Participant accounts with
respect to which AAL has received voting instructions from the Beneficial 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 "FOR" approval of the Sub-Advisory Agreement. Shares with
respect to which no proxy is received and any shares held by AAL, its
subsidiaries or affiliates for their own account will be voted by AAL in
proportion to the shares with respect to which AAL has received instructions
from Beneficial Owners. For purposes of calculating AAL's proportional voting,
any uninstructed shares will be counted the same as shares with respect to which
AAL has received instructions to vote "FOR" approval of the Sub-Advisory
Agreement.
By way of example, suppose there were outstanding a total of 1,000
shares of the Fund, and that AAL owned 100 shares outright for its own account
and the balance were owned beneficially by Beneficial Owners. Suppose further
that Beneficial Owners owning beneficially 680 of those shares returned proxies
instructing AAL as follows:
(a) To vote 340 shares "FOR" approval of the Sub-Advisory Agreements;
(b) To vote 170 shares "AGAINST" approval;
(c) To abstain from voting 85 shares; and
(e) Providing no voting instructions with respect to the remaining 85
shares.
Under these circumstances, 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 Sub-Advisory Agreement. In
addition, of the remaining 320 shares (including the 100 owned directly by AAL
and the 220 held for Beneficial Owners that did not return executed proxies),
AAL would vote 200 shares "FOR" approval (which is proportional 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.
With respect to votes by Certificate Holders, the number of votes that
each Certificate Holder may instruct is determined by dividing a Certificate's
accumulated value in the sub-account associated with the Fund in the relevant
Variable Account as of the Record Date by the net asset value per share of the
Fund. Fractional shares are counted. Each Plan Participant may instruct the
voting of Fund shares allocated to his or her account.
Shares represented by properly executed proxies received by the Company
will be voted at the Special Meeting and any adjournment thereof in accordance
with the terms of such proxies, as described above. A Beneficial 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 Company prior to the
Special Meeting or by delivering a duly executed proxy bearing a later date.
Certificate Holders owning Certificates representing shares at the
close of business on the Record Date, and Plan Participants to whose AAL Plan
account shares of the Fund have been allocated as of the close of business on
the Record Date, will be entitled to one vote on each matter presented for each
share so represented or allocated. At that date, there were 4,508,551 shares of
the Fund outstanding.
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ADJOURNMENT
In the event that sufficient votes in favor of approval of the
Sub-Advisory Agreement 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 shares present 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 "FOR" approval
of the Sub-Advisory Agreement. They will vote against any such adjournment those
proxies required to be voted "AGAINST" approval of the Sub-Advisory Agreement.
COST OF SOLICITATION
In addition to this solicitation of proxies by use of the mails,
proxies may be solicited by officers of the Company and by officers and
employees of AAL CMC personally or by telephone or telegraph, without special
compensation. Proxies may also be solicited by a professional proxy solicitation
service should management of the Company determine that solicitation by such
means is advisable. The cost of preparing and mailing proxy materials, of the
Special Meeting, and of soliciting proxies will be borne by the Fund.
UPON REQUEST AND AT NO COST TO A REQUESTING SHAREHOLDER, THE COMPANY WILL MAIL,
BY FIRST CLASS MAIL, A COPY OF THE FUNDS' ANNUAL REPORT FOR THE YEAR ENDED
DECEMBER 31, 1999. REQUESTS SHOULD BE DIRECTED TO THE ATTENTION OF FREDERICK D.
KELSVEN, SECRETARY, AT THE AAL VARIABLE PRODUCT SERIES FUND, INC., 4321 NORTH
BALLARD ROAD, APPLETON, WISCONSIN 54919-0001, TELEPHONE: 1-800-225-5225.
APPROVAL OF NEW SUB-ADVISORY AGREEMENT FOR THE AAL VARIABLE PRODUCT HIGH YIELD
BOND PORTFOLIO
BACKGROUND
The Board of Directors has determined that it is in the best interest
of the Shareholders of the Fund to engage PIMCO as the sub-adviser to the Fund.
Accordingly, the Board recommends that the Shareholders of the Fund approve a
Sub-Advisory Agreement (the " Sub-Advisory Agreement") among the Company (on
behalf of the Fund), AAL CMC and PIMCO. The change is being recommended for the
reasons discussed below.
AAL CMC presently manages the Fund's investments. Under its management,
the investment performance of the Fund has been below a level deemed acceptable
by the Directors and AAL CMC. The Board of Directors and management determined
that they should investigate alternatives in an effort to improve the Fund's
performance.
Among the alternatives considered, management investigated the
possibility of continuing the in-house management of the Fund, and retained a
national search firm to assist in identifying and considering qualified
personnel that might enhance AAL CMC's strengths in the area of high yield
management. In the course of pursing this possibility, management of AAL CMC
determined, for various reasons, that this would not be a viable option at this
time. The Board of Directors and management determined that they should
investigate other alternatives designed to improve the Fund's performance.
The search therefore focused on finding and negotiating acceptable
terms with an outside sub-adviser to manage the Fund's investments, while
retaining the services of AAL CMC to provide administrative and other services
it presently provides to the Fund under its investment advisory agreement with
the Fund. AAL CMC reviewed and analyzed a worldwide data base of investment
managers published by Lipper Inc. to identify possible candidates. Through this
process, management narrowed the field to a list of investment management firms
that had personnel with experience in the high yield bond market and investment
styles that potentially qualified them as candidates to manage the Fund's
investments. Management conducted telephone interviews with those firms, to
learn more about their experience, investment management styles and philosophy,
performance and personnel and their level of interest in managing the Fund's
assets. Based on the telephone interviews, management narrowed the field of
candidates to three firms, all of which were invited to participate in
face-to-face interviews and to give personal presentations. After follow-up
discussions and further information exchanges, management identified PIMCO as
the leading candidate. AAL CMC engaged in a further due diligence investigation
of PIMCO, which confirmed management's assessment. The parties then negotiated
fee proposals and other terms of possible engagement of PIMCO as a sub-adviser
to the Fund, as reflected in the attached Sub-Advisory Agreement.
AAL CMC kept the Board of Directors apprised of the steps it was taking
throughout this process, and ultimately AAL CMC presented the Board with its
analyses, findings and recommendations at a special meeting of the Board called
and held for that purpose on May 1, 2000. After a thorough consideration of the
process undertaken by management and AAL CMC and the information, analyses and
recommendations presented, the Board of Directors concluded that the retention
of PIMCO to serve as sub-adviser to the Fund under the terms of the proposed
Sub-Advisory Agreement would be in the best interests of the Fund and its
shareholders. For a detailed description of the specific factors considered by
the Board of Directors, see the discussion under the caption "Directors'
Considerations and Recommendation" below.
PIMCO, which was established in 1971, is an independently owned money
management organization primarily specializing in fixed income management. PIMCO
is registered as an investment adviser with the Securities and Exchange
Commission. As of December 31, 1999, PIMCO had under management in excess of
$185.9 billion in assets. PIMCO currently serves as adviser or sub-adviser to
two other high yield bond funds with assets of approximately $3.3 billion as of
March 31, 2000. Those two funds are described in more detail in Appendix B.
DESCRIPTION OF ADVISORY AGREEMENT
AAL served as investment adviser to the Fund from commencement of its
operations on March 2, 1998 until December 31, 1999, when that function was
transferred to AAL CMC as a part of AAL's restructuring of its operations. AAL
CMC provides investment advisory services pursuant to the terms of an Investment
Advisory Agreement, dated January 1, 2000, which has terms and conditions
identical to those pursuant to which AAL formerly provided investment advisory
services to the Fund. Continuation of the Investment Advisory Agreement from
year-to-year is subject to annual approval by the Board of Directors, including
at least a majority of the independent Directors. The Investment Advisory
Agreement was last approved by the Board of Directors at a meeting held on
December 3, 1999. The Investment Advisory Agreement provides that AAL CMC is
entitled to compensation for services provided thereunder at the rate of 0.40%
of the Fund's average daily net assets. The fee is computed daily and paid
monthly. The Fund paid AAL a total of $125,283 for services provided under the
Investment Advisory Agreement for the Fund's fiscal year ended December 31,
1999. AAL waived fees and/or reimbursed expenses to the Fund in the total amount
of $78,302 for that year.
Prior to January 1, 2000, AAL CMC, served as sub-adviser to the Fund.
As sub-adviser, AAL CMC was paid a sub-advisory fee of 0.25% of the Fund's
average daily net assets. This fee was calculated daily and paid out monthly
from the fee paid to the AAL as the investment adviser to the Fund. As
sub-adviser, AAL CMC received $78,302 for services provided to the Fund for the
fiscal year ended December 31, 1999
THE RETENTION OF PIMCO AS SUB-ADVISER WILL HAVE NO EFFECT ON THE TERMS
OF THE INVESTMENT ADVISORY AGREEMENT OR THE ADVISORY FEE PAID BY THE FUND.
PIMCO's sub-advisory fee will be paid by AAL CMC out of its advisory fee. That
advisory fee is presently 0.40% of the Fund's average daily net assets.
DESCRIPTION OF SUB-ADVISORY AGREEMENT
Under the Sub-Advisory Agreement, PIMCO, subject to the direction and
control of AAL CMC and the Board of Directors, would determine the securities
that would be purchased or sold by the Fund, would arrange for their purchase
and sale and would render other assistance to AAL CMC in formulating and
implementing the investment program of the Fund. PIMCO would furnish or pay for
all facilities, equipment and supplies required for it to carry out its duties
under the Sub-Advisory Agreement, including, but not limited to, office space,
office equipment, furnishings and personnel.
Under the Sub-Advisory Agreement, PIMCO would receive a fee, calculated
daily and paid monthly, out of the fee paid to the Adviser under the Advisory
Agreement, at an annual rate of 0.25% of average daily net assets of the Fund.
Because AAL CMC would pay this fee out of the advisory fee it receives from the
Fund, the retention of PIMCO and PIMCO's receipt of this sub-advisory fee would
not increase the overall fee paid by the Fund.
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Services to be Rendered by PIMCO to the Fund. Under the Sub-Advisory
Agreement, PIMCO would:
o Buy, sell, exchange, convert, lend and otherwise trade in any
stocks, bonds, currencies, and any other securities or assets;
o 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 PIMCO
may select;
o 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; and
o Provide AAL CMC and the Directors with such reports as may
reasonably be requested in connection with the discharge of the
foregoing responsibilities and the discharge of AAL CMC's
responsibilities under the Investment Advisory Agreement.
Beyond the performance of these contractual services, PIMCO will
provide marketing assistance and assistance with the servicing of Beneficial
Owners. In general, this assistance will take the form of meetings and
conference calls between one or more of PIMCO's investment staff with licensed
representatives of AAL CMC and/or Beneficial Owners.
If approved, we presently anticipate the Sub-Advisory Agreement would
become effective on or about July 1, 2000. Unless earlier terminated as
described below, the Sub-Advisory Agreement would remain in effect from year to
year only so long as such continuance is specifically approved at least annually
by the affirmative vote of: (i) a majority of the Directors who are not parties
to the 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 the approval; and (ii) either a majority of the entire Board of
Directors or of holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund.
The Sub-Advisory Agreement may be terminated by PIMCO at any time
without penalty upon giving AAL CMC and AAL Funds sixty (60) days written
notice, and by AAL Funds or AAL CMC at any time without penalty upon giving
PIMCO sixty (60) days written notice, provided that any termination by AAL Funds
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.
If the Sub-Advisory Agreement is not approved by the shareholders of
the Fund, AAL CMC will continue to manage the Fund's assets under the terms of
the Investment Advisory Agreement, while other options can be pursued. The
Directors would then consider what course of action to pursue with respect to
the Fund, which could involve renewing the search for additional personnel to
assist AAL CMC with management of the Fund or seeking a different outside
sub-adviser.
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INFORMATION ABOUT PIMCO
GENERAL. PIMCO is a Delaware general partnership and is a wholly-owned
subsidiary of PIMCO Advisors, L.P. ("PIMCO Advisors"). PIMCO is located at 800
Newport Center Drive, Newport Beach, California 92660. PIMCO is a money
management firm and is registered as an investment adviser with the Securities
and Exchange Commission. The Principal Executive Officer and Managing Directors
of PIMCO are listed in Appendix C.
Allianz of America, Inc. ("Allianz of America") owns approximately 70%
of the outstanding partnership interests in PIMCO Advisors. The remainder of the
partnership interests in PIMCO Advisors are owned by Pacific Life Insurance
Company ("Pacific Life"). Allianz of America is a subsidiary of Allianz AG.
Allianz AG is a leading provider of financial services, particularly in Europe,
and is represented in 68 countries world-wide through subsidiaries, branch and
representative offices, and other affiliated entities.
Significant institutional shareholders of Allianz AG currently include,
among others, Dresdner Bank AG, Deutsche Bank AG, Munich Reinsurance and Hypo
Vereinsbank. Credit Lyonnais, Dresdner Bank AG and Deutsche Bank AG, as well as
certain broker-dealers that might be deemed to be affiliated with these
entities, such as DB Alex Brown LLC, Deutsche Bank Securities, Inc. and Dresdner
Kleinwort Benson North America LLC (collectively, the "Affiliated Brokers"), may
be considered to be affiliated persons of PIMCO. Absent an SEC exemption or
other relief, the Fund generally will be precluded from effecting principal
transactions with the Affiliated Brokers, and its ability to purchase securities
being underwritten by an Affiliated Broker or to utilize the Affiliated Brokers
for agency transactions is subject to restrictions. PIMCO does not believe that
the applicable restrictions on transactions with the Affiliated Brokers
described above will materially adversely affect its ability to provide services
to the Fund, the Fund's ability to take advantage of market opportunities, or
the Fund's overall performance. Other series of the Company for which PIMCO (or
an affiliate) does not serve as investment adviser or sub-adviser are not, in
general, subject to those same restrictions.
PORTFOLIO MANAGER. Mr. Benjamin Trosky, CFA, leads PIMCO's high yield
team and would be the portfolio manager of the Fund. Mr. Trosky is a Managing
Director and a senior member of PIMCO's portfolio management and investment
strategy groups. He also oversees the firm's credit research team, and is the
portfolio manager for the PIMCO High Yield Fund. Mr. Trosky joined the firm 10
years ago, having been previously associated with Merrill Lynch Asset Management
as a co-manager of high yield mutual funds. He has 20 years of investment
experience in equity and credit research, and holds a bachelor's degree in
Business Administration from Drexel University.
<PAGE>
DIRECTORS' CONSIDERATIONS AND RECOMMENDATION
In considering this matter, among other factors considered by the Board
of Directors, the following factors were important in its decision to recommend
PIMCO as sub-adviser for the Fund and the terms of the Sub-Advisory Agreement:
<PAGE>
o The breadth of PIMCO's experience in the high yield markets and
management of bond portfolios, and the success it has achieved
managing investments in those markets;
o PIMCO's philosophy with respect to risk management, including its
practice of focusing on relatively higher quality tiers of the
high yield market, its issuer diversification and industry
concentration limitations and its management of duration;
o The high level of consistency of PIMCO's investment philosophy
and style with the investment objective and investment program of
the Fund;
o The quality and integrity of the personnel who would be directly
responsible for attending to the Fund;
o The fee schedule under which PIMCO is willing to provide
services;
o The fact that the retention of PIMCO will not increase the
overall fee that the Fund pays for investment management
services; and
o The financial strength of PIMCO.
Based upon these considerations, the Board determined that it would be
in the best interests of the Fund's shareholders to have PIMCO serve as the
Fund's sub-adviser. The Board of Directors has further determined that the terms
of the Sub-Advisory Agreement are fair to, and in the best interests of, the
Fund and its shareholders.
ACCORDINGLY, THE BOARD OF DIRECTORS, NONE OF WHOM IS AN "INTERESTED PERSON" OF
PIMCO OR ANY OF ITS AFFILIATES, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE
FUND VOTE "FOR" APPROVAL OF THE SUB-ADVISORY AGREEMENT.
OTHER BUSINESS
Management 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
ADMINISTRATOR AND DISTRIBUTOR
In addition to serving as investment adviser to the Funds, AAL CMC also
performs certain administrative services for the Fund, including accounting,
expense accrual, valuation and financial reporting and tax accounting services,
pursuant to the terms of an Administrative Services Agreement with AAL. AAL pays
AAL CMC's fees for these services, and the Fund therefore bears no portion of
those fees. AAL CMC serves as the distributor of the variable products funded by
shares of the Fund. AAL CMC's principal executive offices are located at 222
West College Avenue, Appleton, Wisconsin 54919.
AAL CMC was organized in 1986 as a Delaware corporation. It is a
wholly-owned subsidiary of AAL Holdings Inc., which in turn is a wholly-owned
subsidiary of Aid Association for Lutherans ("AAL"). AAL is a non-profit,
non-stock membership organization licensed to do business as a fraternal benefit
society in all states. AAL has more than 1.7 million members and is the world's
largest fraternal benefit society in terms of assets and life insurance in
force. AAL ranks in the top 2% of all life insurers in the United States in
terms of ordinary life insurance (nearly $88 billion in force). AAL offers life,
health and disability income insurance and fixed and variable annuities to its
members. All members are part of one of approximately 10,000 local AAL branches
throughout the United States. AAL's principal executive offices are located at
4321 North Ballard Road, Appleton, Wisconsin 54919.
PORTFOLIO TRANSACTIONS
AAL CMC directs and, if approved as the Fund's sub-adviser PIMCO will
direct, the placement of orders for the purchase and sale of the Fund's
portfolio securities. The costs of securities transactions for the Fund consist
primarily of brokerage commissions or dealer or underwriter spreads. Bonds and
money market instruments are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the sellers who make
a market in the securities are dealt with directly unless better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. In placing portfolio transactions, AAL CMC seeks, and PIMCO
will seek, the best combination of price and execution.
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 Fund as of April 28,
2000.
<PAGE>
The table presented in Appendix D attached to this Proxy Statement
shows shares of the Fund as to which each Director and the group consisting of
all Directors and executive officers of the Company had or shared power over
voting or disposition as of April 28, 2000.
SHAREHOLDER MEETINGS
The Company is organized as a Maryland corporation, and as such is
subject to Maryland law. Pursuant to Maryland law and the Company's Articles of
Incorporation, the Company is not required to hold a shareholder meeting unless
the election of Directors, approval of the investment advisory agreement (or any
sub-advisory agreement) or ratification of the selection of independent public
accountants is required to be acted upon by shareholders under the 1940 Act.
Meetings of the shareholders will be held when and as determined necessary by
the Board of Directors of the Company and in accordance with the 1940 Act. Other
than the Special Meeting to which this Proxy Statement relates, the Company
currently does not anticipate holding a meeting of shareholders in 2000.
Beneficial Owners 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: Frederick D. Kelsven, Secretary. Proposals must be received a
reasonable time prior to the date of the shareholder meeting to be considered
for inclusion in the proxy materials for the meeting. Timely submission of a
proposal does not, however, necessarily mean that the proposal will be included.
Persons named as proxies for any subsequent shareholders meeting will vote in
their discretion with respect to proposals submitted on an untimely basis.
<PAGE>
AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL Variable Product High Yield Bond Portfolio
Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints _______________ and _________________, or either
of them, proxy, with full power of substitution, to represent and vote, as
designated below, all shares the undersigned is beneficially entitled to vote at
the Special Meeting of Shareholders of the AAL Variable Product High Yield Bond
Portfolio to be held at 222 West College Avenue, Appleton, Wisconsin 54919
beginning at 10:00 am local time, on June 21, 2000, or at any adjournment
thereof, with respect to the matters set forth below and described in the
accompanying Notice of Special Meeting and Proxy Statement, receipt of which is
hereby acknowledged.
DATED: , 2000
(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, Directors 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 THE PROPOSAL.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------- ----------------- ------------------ ------------
1. Proposal to approve the Sub-Advisory Agreement among AAL Variable __ FOR __ AGAINST __ ABSTAIN
Product Series Fund, Inc. (on behalf of the AAL Variable Product High Yield Bond
Portfolio), AAL Capital Management Corporation and Pacific Investment Management
Company, a copy of which is attached as Appendix A to the accompanying Proxy
Statement.
- ---------------------------------------------------------------------------------- ----------------- ------------------ ------------
2. In their discretion on such other matters as may properly come before the meeting or any adjournment
thereof.
</TABLE>
<PAGE>
APPENDIX A
FORM OF SUB-ADVISORY AGREEMENT
AAL VARIABLE PRODUCT SERIES FUND, INC.
SUB-ADVISORY AGREEMENT FOR THE
AAL VARIABLE PRODUCT HIGH YIELD BOND PORTFOLIO
WITH
PACIFIC INVESTMENT MANAGEMENT COMPANY
AGREEMENT made this ____ day of ______________, 2000, by and among AAL
VARIABLE PRODUCT SERIES FUND, INC. (the "Fund"), a Maryland corporation, AAL
CAPITAL MANAGEMENT CORPORATION (the "Adviser"), a Delaware corporation, and
PACIFIC INVESTMENT MANAGEMENT COMPANY (the "Sub-Adviser"), a Delaware general
partnership.
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 with respect to the investment and reinvestment of the assets of the
Fund's series of shares described as the AAL Variable Product High Yield Bond
Portfolio. It is understood that the Fund has designated, and there presently
exist, several other series of the Fund's shares, and that the Fund may create
one or more additional mutual fund series from time to time in the future. This
Agreement may be amended by the mutual written agreement of the parties to
include any such additional series under the terms of this Agreement.
2. Duties and Obligations of the Sub-Adviser with Respect to Investment
of Assets of the Fund.
(a) Subject to the succeeding provisions of this section and
subject to the oversight and review of the Adviser and the direction
and control of the Board of 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, on behalf of each series covered from time to time by this
Agreement, 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;
(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. 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; and
(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 under the Distribution 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 securities and other assets of each series covered from
time to time by this Agreement, 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.
<PAGE>
(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 I0f-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 Schedule 13F
reporting for the securities held by the AAL Variable Product High
Yield Bond 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.
<PAGE>
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 monthly in arrears and computed on the average
daily net asset value of the AAL Variable Product High Yield Bond Portfolio at
rates shown on Exhibit A attached hereto.
7. Duration and Termination.
(a) This Agreement shall go into effect for the AAL Variable
Product High Yield Bond Portfolio on ______________, 2000, or as soon
thereafter as it is approved by shareholders of that series, 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,
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 AAL Variable
Product High Yield Bond Portfolio, or with respect to any other mutual
fund series of the Fund covered by this Agreement, by the vote of a
majority of the outstanding shares of such series. 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. Action By An Individual Series.
The provisions of this Agreement and any amendments hereto with respect
to any series of the Fund may be approved by the shareholders of that series and
become effective with respect to the assets of that series without the necessity
of approval thereof by shareholders of any other series. The Adviser represents
that the holders of a majority (as defined in the "Act") of the AAL Variable
Product High Yield Bond Portfolio, will vote on approval of the entry into this
Agreement on behalf of said series.
<PAGE>
9. Notices.
The Sub-Adviser agrees to promptly notify the Adviser of the occurrence
of any of the following events:
(a) Any change in any of the Sub-Adviser's portfolio managers;
(b) The Sub-Adviser fails to be registered as an investment adviser
under the Advisers Act or under the laws of any jurisdiction in which the
Sub-Adviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
(c) The Sub-Adviser is the subject of any action, suit, proceeding,
inquiry or investigation at law or in equity, before any court, public
board or body, involving the affairs of the AAL Variable Product High Yield
Bond Portfolio or another series of the Fund covered by this Agreement; or
(d) Any change in ownership or control, or partnership structure of
the Sub-Adviser.
10. Manner of Notice.
Any notice given hereunder shall be in writing and may be served by
being sent by telex, facsimile or other electronic transmission, or sent by
registered mail or by courier to the address set forth below for the party for
which it is intended. A notice served by mail shall be deemed served seven days
after mailing and in the case of telex, facsimile or other electronic
transmission, 12 hours after confirmed receipt thereof. Addresses for notice may
be changed by written notice to the other party.
The Adviser: Robert G. Same, President
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007
Fax: (920)730-3783
The Fund: Robert G. Same, President
AAL Variable Product Series Fund, Inc.
4321 North Ballard Road
Appleton, WI 54919-0001
Fax (920) 734-5721
The Sub-Adviser: ___________________________
Pacific Investment Management Company
800 Newport Center Drive
Suite 300
Newport Beach, CA 92660
Fax: (949) 720-1376
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by all of the
parties.
The Adviser and the Fund acknowledge 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the day and year first above written.
AAL VARIABLE PRODUCT SERIES FUND, INC.
Robert G. Same, President
AAL CAPITAL MANAGEMENT CORPORATION
Robert G. Same, President
PACIFIC INVESTMENT MANAGEMENT COMPANY
[Insert Name and Title of Signing Officer]
EXHIBIT A TO THE AAL VARIABLE PRODUCT SERIES FUNDS SUB-ADVISORY AGREEMENT (Dated
_________________)
1. AAL Variable Product High Yield Bond Portfolio
The management fee for the AAL Variable Product High Yield Bond
Portfolio, payable to the Sub-Adviser by the Adviser, calculated in accordance
with paragraph 6 of The AAL Variable Product Series Fund's Sub-Advisory
Agreement, shall be at the annual rate of: 25 basis points.
<PAGE>
APPENDIX B
The address of each managing director of PIMCO and the principal
executive officer is 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660.
MANAGING DIRECTORS
<TABLE>
<CAPTION>
<S> <C>
NAME AND ADDRESS PRINCIPAL OCCUPATION
William S. Thompson, Jr. Managing Director, Chief Executive Officer and Executive Committee
April 1993 to Present Member, PIMCO; Managing Director, Chief Executive Officer and
Director, PIMCO Management, Inc.; Member of Management Board and
Executive Committee, PIMCO Advisors L.P.; President, Chief Executive
Officer and Member, PIMCO Partners LLC.
William R. Benz, II Managing Director, PIMCO; Managing Director and Director, PIMCO
June 1986 to Present Management, Inc.; Member of PIMCO Partners LLC.
Robert Wesley Burns Managing Director and Executive Committee Member, PIMCO; Managing
February 1987 to Present Director and Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Chris P. Dialynas Managing Director, PIMCO; Managing Director and Director, PIMCO
July 1983 to Present Management, Inc.; Member of PIMCO Partners LLC.
Mohamed A. El-Erian Managing Director, PIMCO; Managing Director and Director, PIMCO
May 1999 to Present Management, Inc.
William H. Gross Managing Director, PIMCO; Managing Director and Director, PIMCO
June 1971 to Present Management, Inc.; Director and Vice President, StocksPLUS Management,
Inc.; Member of Management Board, PIMCO Advisors L.P.; Member of
PIMCO Partners LLC.
John L. Hague Managing Director and Executive Committee Member, PIMCO; Managing
September 1987 to Present Director and Director, PIMCO Management, Inc.; Member of PIMCO
Partners LLC.
Pasi M. Hamalainen Managing Director, PIMCO; Managing Director and Director, PIMCO
January 1994 to Present Management, Inc.
Brent R. Harris Managing Director and Executive Committee Member, PIMCO; Managing
June 1985 to Present Director and Director, PIMCO Management, Inc.; Director and Vice
President, StocksPLUS Management, Inc.; Member of Management Board
and Executive Committee, PIMCO Advisors L.P.; Member of PIMCO
Partners LLC.
Brent L. Holden Managing Director, PIMCO; Managing Director and Director, PIMCO
December 1989 to Present Management, Inc.
Margaret E. Isberg Managing Director, PIMCO; Managing Director and Director, PIMCO
August 1983 to Present Management, Inc.; Member of PIMCO Partners LLC.
John S. Loftus Managing Director, PIMCO; Managing Director and Director, PIMCO
August 1986 to Present Management, Inc.
Dean S. Meiling Managing Director, PIMCO; Managing Director and Director, PIMCO
December 1976 to Present Management, Inc.; Member of PIMCO Partners LLC.
James F. Muzzy Managing Director and Executive Committee Member, PIMCO; Managing
September 1971 to Present Director and Director, PIMCO Management, Inc.; Director and Vice
President, StocksPLUS Management, Inc.; Member of PIMCO Partners LLC.
William F. Podlich, III Managing Director, PIMCO; Managing Director and Director, PIMCO
June 1966 to Present Management, Inc.; Member of Management Board, PIMCO Advisors L.P.;
Member of PIMCO Partners LLC.
William C. Powers Managing Director, PIMCO; Managing Director and Director, PIMCO
January 1991 to Present Management, Inc.; Member of PIMCO Partners LLC.
Ernest L. Schmider Managing Director and Secretary, PIMCO; Managing Director, Director,
March 1994 to Present and Secretary, PIMCO Management, Inc.; Director and Assistant
Secretary, StocksPLUS Management, Inc.; Senior Vice President, PIMCO
Advisors, L.P.; Secretary PIMCO Partners, LLC.
Lee R. Thomas Managing Director, PIMCO; Managing Director and Director, PIMCO
April 1995 to Present Management, Inc.; Member of PIMCO Partners LLC.
Benjamin L. Trosky Managing Director, PIMCO; Managing Director and Director, PIMCO
October 1990 to Present Management, Inc.; Member of Management Board, PIMCO Advisors L.P.;
Member of PIMCO Partners LLC.
</TABLE>
<PAGE>
APPENDIX C
PACIFIC INVESTMENT MANAGEMENT COMPANY
MUTUAL FUND CONTRACT RENEWAL INFORMATION
MANAGEMENT FEE SCHEDULES FOR SUB-ADVISORY RELATIONSHIPS:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF FUND ADVISORY RATE FEE APPROXIMATE ASSETS
PIMCO FUNDS:
PACIFIC INVESTMENT MANAGEMENT SERIES:
High Yield Bond Fund Annual rate of 0.25% of average daily net $131,180,580
assets
PIMCO VARIABLE INSURANCE TRUST:
High Yield Bond Portfolio Annual rate of 0.25% of average daily net $141,365,884
assets
</TABLE>
<PAGE>
APPENDIX D
The table below shows shares of the AAL Variable Product High Yield
Bond Portfolio as to which each Director and the group consisting of all
Directors and executive officers of AAL had or shared power over voting or
disposition as of April 28, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
PERCENT OF
OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES OF THE FUND SHARES OF FUND
- ---------------- ---------------------------- --------------
F. Gregory Campbell 0 0.00%
Carthage College
2001 Alford Park Drive
Kenosha, WI 53140
Woodrow E. Eno 0 0.000%
Aid Association for Lutherans
4321 North Ballard Road
Appleton, WI 54919
Richard L. Gady 0 0.00%
Conagra Inc.
One Conagra Drive
Omaha, NE 68102-5001
John O. Gilbert 0 0.00%
Aid Association for Lutherans
4321 North Ballard Road
Appleton, WI 54919
John H. Pender 0 0.00%
1056 S. Manzanita Avenue
Palm Springs, CA 92264
Edward W. Smeds 0 0.00%
10 Regent Wood Road
Northfield, IL 60093
Lawrence M. Woods 0 0.00%
524 Sunset Drive
Worland, WY 82401
All Trustees and Executive Officers as a 0 0.00%
Group (a total of ____ persons)
</TABLE>
