INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
AAL VARIABLE PRODUCT SERIES FUND, INC.
AND
AID ASSOCIATION FOR LUTHERANS
TABLE OF CONTENTS
1. In General........................................................... 3
2. Duties and Obligations of the Adviser With
Respect to Management of the Fund............................ 3
3. Standard of Care and Indemnification...................................5
4. Broker-Dealer Relationships............................................6
5. Allocation of Expenses.................................................6
6. Compensation of the Adviser ...........................................7
7. Duration and Termination...............................................8
8. Exhibits ..............................................................8
9. Amendments.............................................................8
10. State Law..............................................................8
EXHIBIT A....................................................................10
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT made and entered into this 27th day of
September, 1994, by and between THE AAL VARIABLE PRODUCT SERIES FUND, INC. (the
"FUND"), a Maryland corporation, and Aid Association for Lutherans, a Wisconsin
corporation (the "ADVISER").
The FUND is an open-end management investment company registered with the
Securities and Exchange Commission under the Investment Company Act of 1940 (the
"Act"). The FUND is a series type investment company, with each series having
its own investment objectives, policies and restrictions. AAL is registered with
the Securities and Exchange Commission as an Investment Adviser under the
Investment Advisers Act of 1940.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. In General
The FUND hereby appoints the ADVISER to act as investment adviser to the
FUND with respect to its series of shares described on Exhibit A attached
hereto, which may be amended from time to time. Each series is referred to
herein individually as a "Portfolio" and collectively as the "Portfolios." The
ADVISER agrees, all as more fully set forth herein, to provide professional
investment management with respect to the investment of the assets of each
Portfolio and to supervise and arrange the purchase and sale of securities and
other assets held in each Portfolio and generally administer the affairs of the
FUND. The ADVISER may engage, at the ADVISER'S cost and under the ADVISER'S
supervision, on behalf of the FUND or any Portfolio, the services of a
Sub-Adviser, or an agent to perform certain administrative services, subject to
any limitations imposed by the Act.
2. Duties and Obligations of the Adviser With Respect to Management of the Fund
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Directors of the FUND, the
ADVISER, as agent and attorney-in-fact with respect to the FUND, is
authorized, in its discretion and without prior consultation with the
FUND to:
(i) Buy, sell, exchange, convert for the FUND's use, lend and
otherwise trade in any stocks, bonds and any other securities or
assets; and
(ii) Place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
ADVISER may select;
(iii) Formulate programs, obtain necessary information, and
periodically report to the FUND's Board of Directors.
(b) Any investment purchases or sales made by the ADVISER shall at all
times conform to, and be in accordance with, any requirements imposed by:
(i) the provisions of the Act and of any rules or regulations in
force thereunder; (ii) the provisions of the Internal Revenue Code;
(iii) any other applicable provisions of law; (iv) the provisions
of the Articles of Incorporation and By-Laws of the FUND as amended
from time to time; (v) any policies and determinations of the Board
of Directors of the FUND; and (vi) the fundamental policies of the
FUND, as reflected in its Registration Statement under the Act, or
as amended by the shareholders of the FUND.
(c) The ADVISER shall also administer the affairs of the FUND and, in
connection therewith, shall be responsible for: (i) maintaining the
FUND's books and records, including all financial, accounting, corporate
and other records required by and in accordance with applicable law
(other than financial or accounting books and records maintained by the
FUND's custodian or transfer agent) which books and records shall be the
property of the FUND and shall be surrendered by the ADVISER promptly on
the request of the FUND, without charge except for the ADVISER's direct
expenses; (ii) overseeing the FUND's insurance relationships; (iii)
preparing for the FUND (or assisting counsel and/or auditors in the
preparation of) all required tax returns, proxy statements and reports to
the FUND's shareholders and Directors and reports to and other filings
with the Securities and Exchange Commission, and any other governmental
agency including any filings necessary to maintain the registrations and
qualifications of the Fund and its shares under federal and state law
(the FUND agreeing to supply or cause to be supplied to the ADVISER all
necessary financial and other information in connection with the
foregoing); (iv) preparing such applications and reports as may be
necessary to register or maintain the FUND's registration and/or the
registration of the shares of the FUND under the securities or "Blue Sky"
laws of the various states selected by the FUND's distributor (the
Portfolio or Portfolios agreeing to pay all filing fees or other similar
fees in connection therewith); (v) responding to all inquiries or other
communications of shareholders, if any, which are directed to the
ADVISER, or referring the inquiry for response, if any such inquiry or
communication is more properly to be responded to by other parties, such
as the FUND's custodian, or other person or agent of the ADVISER, and
overseeing its response thereto; (vi) overseeing all relationships
between the FUND and its persons and agents, including any custodian(s),
transfer agent(s), dividend disbursing agent, independent auditor and
independent legal counsel, including assistance in selection of such
persons and agents, the negotiation of agreements and the supervision of
the performance of such agreements; (vii) authorizing and directing any
of the ADVISER's Directors, officers and employees who may be elected as
Directors or officers of the FUND to serve in the capacities in which
they are elected; and (viii), providing the services of individuals
competent to perform all of the FUND'S executive, administrative,
compliance and clerical functions that are not performed by or through
employees or other persons or agents engaged by the FUND; and (ix)
calculating the daily net asset value and the net asset value per share
for each of the FUND's Portfolios. All services to be furnished by the
ADVISER under this Agreement may be furnished through the medium of any
Directors, officers, employees or agents of the ADVISER .
(d) Nothing in this Agreement shall prevent the ADVISER or any
"affiliated person" (as defined in the Act) of the ADVISER from acting as
investment adviser or manager and/or principal underwriter for any other
person, firm or corporation and shall not in any way limit or restrict
the ADVISER or any such affiliated person from buying, selling or trading
any securities for its or their own accounts or the accounts of others
for whom it or they may be acting, provided, however, that
the ADVISER expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its
obligations to the FUND under this Agreement.
(e) It is agreed that the ADVISER shall have no responsibility or
liability for the accuracy or completeness of the FUND's Registration
Statement under the Act or the Securities Act of 1933 except for
information supplied by the ADVISER for inclusion therein.
(f) The ADVISER shall act as an independent contractor for the purposes
herein and, unless otherwise expressly provided or authorized, shall have
no authority to act for or represent the FUND in any way or otherwise be
deemed an agent of the FUND.
(g) The ADVISER shall have the authority to make combined purchases and
sales of securities for the Portfolios, the ADVISER'S own accounts, or
for its other clients. If various entities desire to buy or sell
securities at about the same time, the ADVISER may allocate the
transactions at an average price and as nearly as practicable on a
pro-rata basis in proportion to the amounts desired to be purchased or
sold by each entity.
3. Standard of Care and Indemnification
ADVISER shall at all times act in good faith and use its best efforts
within reasonable limits to ensure the accuracy of all services performed under
this Agreement, but assumes no responsibility and shall not be liable for loss
or damage due to errors; provided, that ADVISER shall indemnify and hold the
FUND and each of its directors, officers, and employees and each person, if any,
who controls the FUND within the meaning of Section 15 of the 1933 Act, harmless
from all loss, cost, damage, and expense, including reasonable attorneys' fees,
incurred by the FUND as a result of ADVISER'S gross negligence, bad faith, or
willful misfeasance in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement, or that
of its officers, agents and employees, in the performance of this Agreement.
Notwithstanding the preceding language, ADVISER shall indemnify and hold the
FUND, and each of its directors, officers, and employees and each person, if
any, who controls the FUND within the meaning of Section 15 of the 1933 Act,
harmless from all loss, cost, damage, and expense, including reasonable
attorneys' fees incurred by the FUND as a result of the failure at any time of
any Portfolio of the FUND (i) to operate as a regulated investment company in
compliance with Subchapter M of the Code and the regulations thereunder, or (ii)
to comply the investment diversification rules of Section 817(h) of the Code and
the regulations thereunder.
The FUND shall indemnify and hold ADVISER harmless from all loss, cost,
damage and expense, including reasonable attorneys' fees incurred by it
resulting from any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting upon any
instruction reasonably believed by it to have been properly executed by a duly
authorized officer of the FUND, or upon any information, data, records or
documents provided ADVISER or its agents by computer tape, telex, CRT data entry
or other similar means authorized by the FUND; provided, that this
indemnification shall not apply to actions or omissions of ADVISER in cases of
its own gross negligence, bad faith or willful misfeasance in the performance of
its duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement, or that of its officers, agents and employees, in the
performance of this agreement.
In order that the indemnification provisions contained in this Agreement
shall apply, however, it is understood that if in any case the one party (the
"Indemnitor") may be asked to indemnify or save the
other party (the "Indemnitee") harmless, the Indemnitor shall be fully and
promptly advised of all pertinent facts concerning the matters in question, and
it is further understood that the Indemnitee will use all reasonable care to
identify and notify the Indemnitor promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Indemnitor. The Indemnitor shall have the option to
defend the Indemnitee against any claim which may be the subject of this
indemnification, and in the event that the Indemnitor so elects, it will so
notify the Indemnitee, and thereupon the Indemnitor shall take over complete
defense of the claim, and the Indemnitee shall in such situations incur no
further legal or other expenses for which it shall seek or be entitled to
indemnification under this paragraph. The Indemnitee shall in no case confess
any claim or make any compromise in any case in which the Indemnitor will be
asked to indemnify the Indemnitee except with the Indemnitor's prior written
consent.
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
4. Broker-Dealer Relationships
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and sale of securities and other assets
held by each Portfolio by placing purchase and sale orders for the Portfolio,
the ADVISER shall select such broker-dealers ("brokers") as shall, in the
ADVISER's judgment, implement the policy of the FUND to achieve "best
execution," i.e., prompt and efficient execution at the most favorable net
price. In making such selection, the ADVISER is authorized to consider the
reliability, integrity and financial condition of the broker. The ADVISER is
also authorized to consider whether the broker provides brokerage and/or
research services to the FUND and/or other accounts of the ADVISER. The
commissions paid to such brokers may be higher than another broker would have
charged if a good faith determination is made by the ADVISER that the commission
is reasonable in relation to the services provided, viewed in terms of either
that particular transaction or the ADVISER's overall responsibilities as to the
accounts as to which it exercises investment discretion. The ADVISER shall use
its judgment in determining that the amount of commissions paid are reasonable
in relation to the value of brokerage and research services provided and need
not place or attempt to place a specific dollar value on such services or on the
portion of commission rates reflecting such services. To demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the ADVISER shall be prepared to show that commissions paid
(i) were for purposes contemplated by this Agreement; (ii) provide lawful and
appropriate assistance to the ADVISER in the performance of its decision-making
responsibilities; and (iii) were within a reasonable range as compared to the
rates charged by qualified brokers to other institutional investors as such
rates may become known from available information. The FUND recognizes that, on
any particular transaction, a higher than usual commission may be paid due to
the difficulty of the transaction in question. The ADVISER is also authorized to
consider as a factor in the selection of brokers to execute brokerage and
principal transactions, subject to the requirements of "best execution," as
defined above, sales by brokers of variable annuity contracts resulting in sales
of Fund shares.
5. Allocation of Expenses
The ADVISER agrees that it will furnish the FUND, at the ADVISER's
expense, with all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The ADVISER will
also pay all compensation of all Directors, officers and employees of the FUND
who are affiliated persons of the ADVISER. All costs and expenses not expressly
assumed by the
ADVISER under this Agreement shall be paid by the FUND, including, but not
limited to (i) interest and taxes; (ii) brokerage commissions; (iii) insurance
premiums; (iv) compensation and expenses of its Directors other than those
affiliated with the ADVISER; (v) independent legal and audit expenses; (vi) fees
and expenses of the FUND's custodian, shareholder servicing or transfer agent,
and accounting services agent; (vii) expenses incident to the issuance of its
shares, including stock certificates and issuance of shares on the payment of,
or reinvestment of dividends; (viii) fees and expenses incident to the
registration under federal or state securities laws of the FUND or its shares;
(ix) FUND or Portfolio organizational expenses; (x) FUND expenses of preparing,
printing and mailing reports and notices, proxy material and prospectuses to
shareholders of the FUND; (xi) all other expenses incidental to holding meetings
of the FUND's shareholders; (xii) dues or assessments of or contributions to the
Investment Company Institute or any successor or other industry association;
(xiii) such non-recurring expenses as may arise, including litigation affecting
the FUND and the legal obligations which the FUND may have to indemnify its
officers and Directors with respect thereto; and (xiv) cost of daily valuation
of each of the Portfolio's securities and net asset value per share.
Notwithstanding the foregoing, AAL agrees to reimburse the Fund for
substantially all of its operating expenses, other than investment advisory
fees, brokerage commissions, and any extraordinary items such as litigation
expenses or income tax liabilities. AAL may withdraw this undertaking upon 30
days' written notice to the Fund.
6. Compensation of the Adviser
(a) The FUND agrees to pay the ADVISER and the ADVISER agrees to accept
as full compensation for all services rendered by the ADVISER as such, an
annual management fee, payable monthly and computed on the average daily
net asset value of each Portfolio as shown on "Exhibit A" attached
hereto. The annual management fee will be prorated for any month during
which this Agreement is in effect for only a portion of the month.
(b) In the event the expenses of a Portfolio (including the fees of the
ADVISER and amortization of organization expenses, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses) for
any fiscal year exceed the limits set by applicable regulations of state
securities commissions, the ADVISER will reduce its fee by up to the
amount of such excess. Any such reductions are subject to readjustment
during the year. The payment of the management fee at the end of any
month will be reduced or postponed or, if necessary, a refund will be
made to a FUND so that at no time will there be any accrued, but unpaid,
liability under this expense limitation.
The fees payable to the ADVISER by the FUND or a Portfolio
hereunder shall be reduced by any tender offer solicitation fees or
similar payments received by the ADVISER, or any affiliated person of the
ADVISER, in connection with the tender of securities held by the
Portfolio (less any direct expenses incurred by the ADVISER, or any
affiliated person of the ADVISER, in connection with obtaining such fees
or payments). The ADVISER shall use its best efforts to recapture all
available tender offer solicitation fees and similar payments in
connection with the tenders of the securities held by a Portfolio,
provided, however, that neither the ADVISER, nor any affiliated person of
the ADVISER, shall be required to register as a broker-dealer for this
purpose. The ADVISER shall advise the FUND's Board of Directors of any
fees or payments of whatever type that it may be possible for the
ADVISER, or an affiliated person of the ADVISER, to receive in connection
with the purchase or sale of securities held by a Portfolio. The fees
payable to the ADVISER by a Portfolio hereunder shall be reduced by any
such fees or payments received, less
any direct expenses incurred by the ADVISER or any affiliate of the
ADVISER in obtaining such fees.
7. Duration and Termination
(a) This Agreement shall go into effect as to each Portfolio on the date
set forth above and shall, unless terminated as hereinafter provided,
continue in effect for a period of not more than two years from the
effective date only so long as such continuance is specifically approved
at least annually by the FUND's Board of Directors, including the vote of
a majority of the Directors who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval, or
with respect to any Portfolio by the vote of a "majority" (as defined in
the Act) of the outstanding voting shares of that Portfolio.
(b) This Agreement may be terminated by the ADVISER at any time without
penalty upon giving the FUND sixty (60) days' written notice (which
notice may be waived by the FUND) and may be terminated by the FUND at
any time without penalty upon giving the ADVISER sixty (60) days' written
notice (which notice may be waived by the ADVISER ), provided that such
termination by the FUND shall be directed or approved by the vote of a
majority of all of its Directors in office at the time, or with respect
to any Portfolio, by the vote of a "majority" (as defined in the Act) of
the outstanding voting shares of that Portfolio. This Agreement shall
automatically terminate in the event of its "assignment" (as defined in
the Act).
(c) The FUND hereby agrees that if (i) the ADVISER ceases to act as
investment adviser to the FUND and (ii) the ADVISER notifies the FUND
that, in the ADVISER's judgment, continued use of the FUND's present name
would create confusion in the context of the ADVISER 's business or that
of Aid Association for Lutherans or its subsidiaries and/or affiliates,
the FUND will use its best efforts to change its name in order to delete
the abbreviation "AAL" from its name and will discontinue use of the name
or any sales literature or advertising materials in which the "AAL" name
is used as soon as possible, in no event exceeding 30 days from the date
ADVISER ceases to act as investment adviser to the FUND or so notifies
the FUND.
8. Exhibits
The document entitled "Exhibit A" to the AAL Variable Product Series
Fund, Inc. Investment Advisory Agreement, attached hereto, is added to and
incorporated herein.
9. Amendments
This Agreement may be amended at any time by mutual consent of the
parties in accordance with the Act, provided that the amendment shall have been
approved, in accordance with the Act, with respect to any Portfolio by the vote
of a "majority" (as defined by the Act) of the outstanding voting shares of that
Portfolio.
10. State Law
This Agreement shall be governed in all respects in accordance with the
laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
THE AAL VARIABLE PRODUCT SERIES FUND, INC.
By: /s/ D. Xxxxxxx XxXxxxx
--------------------------------------------
D. Xxxxxxx XxXxxxx
President
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx
Secretary
AID ASSOCIATION FOR LUTHERANS
By: /s/ X. X. Xxxxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxxxx
President and
Chief Executive Officer
By: /s/ X. X. Xxxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxxx
Senior Vice President
Secretary and General Counsel
EXHIBIT A
TO THE AAL VARIABLE PRODUCT SERIES FUND, INC. INVESTMENT ADVISORY
AGREEMENT (Dated September 27, 1994)
1. The AAL Variable Product Money Market Portfolio
The management fee for this Portfolio, calculated in accordance with
paragraph 5 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over $250
million.
2. The AAL Variable Product Large Company Stock Portfolio
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over $250
million.
3. The AAL Variable Product Bond Portfolio
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over $250
million.
4. The AAL Variable Product Small Company Stock Portfolio
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over $250
million.
5. The AAL Variable Product Balanced Portfolio
The management fee for this Portfolio, calculated in accordance with
section 6 of The AAL Variable Product Series Fund, Inc. Investment Advisory
Agreement, shall be at the annual rate of 0.35 of 1% on the first $250 million
of average daily net assets and 0.30 of 1% on average daily net assets over $250
million.
