ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
AAL CAPITAL MANAGEMENT CORPORATION
AND
AID ASSOCIATION FOR LUTHERANS
Dated August 28, 1996
TABLE OF CONTENTS
Page
1. Services. ............................................... 4
--------
2. Rate of Payment for the Services......................... 5
--------------------------------
2.1 Contract Price. .............................. 5
--------------
2.2 Reimbursement for Expenses. .................... 5
---------------------------
3. Employees. .............................................. 5
---------
4. AALCMC's Use of the Services of Others. ................. 5
---------------------------------------
5. Ownership of Records. ................................... 5
--------------------
6. Reports to AAL or the Fund by AALCMC. ................... 6
------------------------------------
7. Services to Other Clients. .............................. 6
-------------------------
8. Limitation of Liability of AALCMC. ...................... 6
---------------------------------
9. Term of Agreement. ...................................... 7
------------------
10. Termination of Agreement. ............................... 7
-------------------------
11. Miscellaneous............................................ 8
--------------
11.1 Captions. ...................................... 8
---------
11.2 Interpretation. ................................ 8
---------------
11.3 Definitions. ................................... 8
-----------
11.4 Governing Law. ................................. 8
-------------
11.5 Amendment. ..................................... 8
----------
11.6 Notices. ....................................... 8
-------
11.7 Entire Agreement. .............................. 9
----------------
11.8 Enforceability. ................................ 9
--------------
11.9 Scope of Agreement. ......................... 9
-------------------
Schedule A Portfolios of the AAL Variable Product Series Fund, Inc.
Schedule B Services to be performed by AALCMC
Schedule C Contract Price Accounting/Pricing Fee Schedule
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and
entered into as of this twenty-eighth day of August, 1996 by and between AAL
CAPITAL MANAGEMENT CORPORATION, ("AALCMC") a Delaware corporation and AID
ASSOCIATION FOR LUTHERANS,
( "AAL") a Wisconsin corporation, (collectively, the "Parties").
WHEREAS, AAL is a fraternal benefit society organized under the laws of
the State of Wisconsin engaged in the writing of life insurance, annuity
contracts, and other insurance products; AAL serves as sponsor and depositor of
AAL VARIABLE ANNUITY ACCOUNT I (the "Variable Account") a legally segregated
asset account of AAL, established pursuant to the laws of the State of Wisconsin
and registered as a unit investment trust in accordance with the provisions of
the Investment Company Act of 1940 (the "1940 Act"), to serve as a segregated
investment account for the purpose of funding certain flexible premium deferred
variable annuity certificates (the "Certificates") AAL and its Variable Account
propose to offer for sale the Certificates, interests of which are registered
with the Securities and Exchange Commission ("SEC") as securities under the
Securities Act of 1933 (the "1933 Act"), the 1940 Act, and the laws of certain
states.
WHEREAS, AAL VARIABLE PRODUCT SERIES FUND, INC. (the "Fund") a Maryland
Corporation, is a diversified open-end management investment company registered
with the SEC under the 1940 Act and the Fund's shares are registered with the
SEC under the 1933 Act; the Fund is a series type investment company, with each
Portfolio having its own investment objectives, policies and restrictions; the
Fund currently consists of five (5) portfolios identified in Schedule A attached
hereto (each portfolio is hereinafter referred to singularly as the "Portfolio"
and collectively as the "Portfolios").
WHEREAS, AALCMC is a wholly-owned indirect subsidiary of AAL; AALCMC is
registered as a broker-dealer with the SEC under the Securities Exchange Act of
1934 (the "1934 Act") and with state securities authorities in all fifty (50)
states; AALCMC is a member of the National Association of Securities Dealers,
Inc. ("NASD") and is authorized to offer and sell mutual funds and variable
insurance products; and AALCMC acts as the "DISTRIBUTOR" pursuant to that
certain Principal Underwriting and
Servicing Agreement, dated November 23rd, 1994, by and between AAL and AALCMC,
whereby AALCMC is the exclusive principal underwriter in a continuous offering
of the Certificates.
WHEREAS, the Fund appointed AAL to act as investment adviser to the
Fund, with respect to the Portfolios, pursuant to that certain Investment
Advisory Agreement, dated September 27, 1994, by and between the Fund and AAL;
such Investment Advisory Agreement provides, in part, that (i) AAL as "Adviser"
to the Fund, 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
Subadviser, or an agent to perform certain administrative services; and (ii) AAL
shall administer the affairs of the Fund by providing, in part, the services of
individuals competent to perform all of the Fund's executive, administrative,
compliance and clerical functions where such services are not performed by or
through the Fund's employees or other people or agents engaged by the Fund.
WHEREAS, AAL desires AALCMC to render the services to the Fund in the
manner and on the terms and conditions hereinafter set forth with respect to
each of the Fund's Portfolios identified on Schedule A attached hereto, as
modified from time to time by the mutual consent of the Parties.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
1. Services.
AAL hereby engages AALCMC, and AALCMC accepts such engagement, to perform
administrative, accounting and pricing services for AAL, on behalf of the Fund,
as set forth in Schedule B, as the same may be modified from time to time by the
mutual consent of the Parties. These services are to be performed according to
the Fund Accounting Performance Standards as may be agreed to by the parties.
AAL agrees that AALCMC shall have ready access to AAL's and the Fund's agents,
books, records, financial information, management and resources, at such times
and for such periods as AALCMC deems necessary to perform the Services.
2. Rate of Payment for the Services.
2.1 Contract Price.
AAL agrees to pay AALCMC for the Services at such rate as set forth in
Schedule C (the "Contract Price"). The Contract Price shall be payable
monthly within ten (10) days of the date of invoice. The Contract Price
shall be reviewed annually, or at such other times as agreed to by the
Parties, and shall be modified by mutual consent of the Parties.
2.2 Reimbursement for Expenses.
Subject to AAL's prior approval, AALCMC may be paid by AAL for
extraordinary expenses and costs incurred by AALCMC in the performance
of services under this Agreement.
3. Employees.
All personnel assigned by AALCMC to perform the Services will be employees of
AALCMC or its affiliates. AALCMC will be considered for all purposes, an
independent contractor, and it will not, directly or indirectly, act as an
agent, servant or employee of AAL or the Fund, or make any commitments or incur
any liabilities on behalf of AAL or the Fund, without AAL's prior written
consent.
4. AALCMC's Use of the Services of Others.
AALCMC may at its cost employ, retain or otherwise avail itself of the services
or facilities of other persons or organizations for the purpose of providing to
AAL, on behalf of the Fund, with such information or Services as it may deem
necessary, appropriate or convenient for the discharge of AALCMC's obligations
hereunder, or in the discharge of AALCMC's overall responsibilities with respect
to the Services to be provided to AAL.
5. Ownership of Records.
All records required to be maintained and preserved by AAL or the Fund, pursuant
to the provisions of rules or regulations of the SEC under Section 31(a) of the
1940 Act, and maintained and preserved by
AALCMC on behalf of AAL or the Fund, are the property of AAL and will be
surrendered by AALCMC to AAL promptly on request by AAL or the Fund.
6. Reports to AAL or the Fund by AALCMC.
AALCMC shall provide AAL or the Fund, at such times as AAL or the Fund may
reasonably require, with reports relating to the Services provided by AALCMC
under this Agreement. Such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by AAL or the Fund.
7. Services to Other Clients.
Nothing herein contained shall limit the freedom of AALCMC or any affiliated
person of AALCMC to render investment advice or corporate administrative
services to other investment companies, to act as investment adviser or
investment counselor to other persons, firms or corporations, or to engage in
other business activities.
8. Limitation of Liability of AALCMC.
8.1 Neither AALCMC, nor any of its officers, directors, or employees,
nor any person performing administrative or other functions for AAL in
connection with AALCMC's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for
any error of judgment or mistake of law or for any loss suffered by AAL
or the Fund in connection with the matters to which this Agreement
relates, except for loss resulting from willful misfeasance, bad faith,
or negligence in the performance of its or their duties on behalf of
AAL or the Fund, or from reckless disregard by AALCMC or any such
person of the duties of AALCMC under this Agreement.
8.2 AALCMC shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts
of civil or military authority, natural or state emergencies, fire,
flood or catastrophe, acts of God, insurrection, war, riots or failure
of transportation, communication or power supply.
8.3 In the event of a mechanical breakdown beyond its control, AALCMC
shall take all reasonable steps to minimize service interruptions for
any period that such interruption continues
beyond AALCMC's control. AALCMC will make every reasonable effort to
restore any lost or damaged data and the correcting of any errors
resulting from such a breakdown will be at the expense of AALCMC.
AALCMC agrees that it shall at all times have reasonable contingency
plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of AAL shall be
entitled to inspect AALCMC's premises and operating capabilities at any
time during regular business hours of AALCMC, upon reasonable notice to
AALCMC.
8.4 The indemnification provided by this Section 8, includes any act,
omission to act, or delay by AALCMC in reliance upon, or in accordance
with, any written or oral instruction it receives from any duly
authorized officer of AAL.
8.5 AAL will notify AALCMC of any balancing or control error caused by
AALCMC within three (3) business days after receipt of any reports
rendered by AALCMC to AAL, or within three (3) business days after
discovery of any error or omission not covered in the balancing or
control procedure, or within three (3) business days of receiving
notice from any Certificate Owner.
9. Term of Agreement.
The term of this Agreement shall begin, with respect to any Portfolio of the
Fund, on the date first above written, or the first offering of any additional
Portfolio(s), if later. Once effective with respect to any Portfolio, this
Agreement will continue in effect from year to year with respect to such
Portfolio, subject to the termination provisions and all other terms and
conditions hereof. AALCMC shall furnish to AAL promptly upon AAL's request, such
information as may reasonably be necessary to evaluate the terms of this
Agreement or any extension, renewal or amendment hereof.
10. Termination of Agreement.
This Agreement may be terminated, with respect to each Portfolio, by either
party hereto without the payment of any penalty, upon sixty (60) days prior
written notice to the other party. This Agreement shall automatically and
immediately terminate in the event of its assignment.
11. Miscellaneous.
11.1 Captions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
11.2 Interpretation.
Nothing herein contained shall be deemed to require AAL or the Fund to
take any action contrary to their respective Articles of Incorporation
or By-Laws, or any applicable statutory or regulatory requirement to
which AAL or the Fund are subject or by which AAL or the Fund are
bound, or to relieve or deprive the board of directors of AAL or the
Fund of their respective responsibility for and control of the conduct
of the affairs of AAL or the Fund.
11.3 Definitions.
Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and to interpretations thereof, if any, by
the United States courts or, in the absence of any controlling decision
of any such court, by rules, regulations or orders of the SEC validly
issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this
Agreement is relaxed by a rule, regulation or order of the SEC, whether
of special or of general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
11.4 Governing Law.
This Agreement shall be construed and governed by the laws of the state
of Wisconsin.
11.5 Amendment.
This Agreement, including the Schedules hereto, may be amended by
mutual consent of the Parties.
11.6 Notices.
All communications or notices required or permitted by this Agreement
shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or
when deposited in the United States Mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed to the
principal place of business of such party, unless and until any of such
Parties notifies the other Parties to this Agreement, Parties in
accordance with this section, of a change of address.
11.7 Entire Agreement.
This Agreement together with the Schedules hereto constitutes the
entire Agreement between AAL and AALCMC with respect to the subject
matter hereof. There are no restrictions, promises, warranties,
covenants or undertakings other than those expressly set forth herein.
This Agreement supersedes all prior negotiations, agreements and
undertakings between the Parties with respect to the subject matter
stated herein.
11.8 Enforceability.
The invalidity or unenforceability of any provision hereof shall not
affect or impair any other provisions of this Agreement.
11.9 Scope of Agreement.
If the scope of any of the provisions of this Agreement is too broad in
any respect whatsoever, to prevent enforcement to its full extent, then
such provisions shall be enforced to the maximum extent permitted by
law, and the Parties hereto consent and agree that such scope may be
judicially modified accordingly and that the whole of such provisions
of this Agreement shall not hereby fail, but that the scope of such
provisions shall be limited only to the extent necessary to conform to
the law.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the day
and year first above written.
AID ASSOCIATION FOR LUTHERANS ("AAL")
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx
President and Chief Operating Officer
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxx
Vice President and Controller
By: /s/ Xxxxxxx X. Xxx
--------------------------------------------
Xxxxxxx X. Xxx
Secretary and General Counsel
AAL CAPITAL MANAGEMENT CORPORATION ("AALCMC")
By: /s/ H. Xxxxxxx Xxxxxx
--------------------------------------------
H. Xxxxxxx Xxxxxx
President
By: /s/ Xxxxxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxxxxx X. Xxxxxxxxx
Senior Vice President and Chief Financial Officer
SCHEDULE A
Portfolios of the AAL Variable Product Series Fund, Inc.
The AAL Variable Product Large Company Stock Portfolio
The AAL Variable Product Small Company Stock Portfolio
The AAL Variable Product Bond Portfolio
The AAL Variable Product Balanced Portfolio
The AAL Variable Product Money Market Portfolio
SCHEDULE B
Services to be performed by AALCMC:
1. Portfolio Accounting Services.
AALCMC shall provide the following portfolio accounting and reporting services
for each Portfolio covered by this Agreement.
1.1 Maintain daily portfolio records for each Portfolio on a trade date
basis using security trade information obtained by AAL, as Investment
Adviser to the Fund;
1.2 On each business day record the prices of the Portfolio positions
from a source approved by the Fund's Board of Directors;
1.3 Record interest and dividend accrual balances each business day on
the securities of each Portfolio and calculate and record each
Portfolios' gross earnings on investments for that day;
1.4 Determine gains and losses on Portfolio securities' sales on a
daily basis for each Portfolio and identify such gains and losses as
short-short, short or long-term. Account for periodic distributions of
gain to Certificate Owners of each Portfolio and maintain undistributed
gain or loss balances as of each business day; and
1.5 Provide each Portfolio with Portfolio-based reports on the
foregoing on a periodic basis as mutually agreed upon between AAL and
AALCMC.
2. Expense Accrual.
AALCMC shall provide accounting and reporting services relating to the accrual
of expenses as described below for each Portfolio of the Fund covered by this
Agreement:
2.1 On each business day, calculate the amounts of expense accrual for
each Portfolio according to the methodology, rate or dollar amount
specified by AAL;
2.2 Account for expenditures and maintain expense accrual balances for
each Portfolio at a level of accounting detail specified by AAL;
2.3 Conduct periodic expense accrual reviews for each series as
requested by AAL comparing actual expenses to accrual amounts; and
2.4 Issue periodic reports for each Portfolio detailing expense
accruals and payments at the times requested by AAL.
3. Valuation and Financial Reporting Services.
AALCMC shall provide accounting and reporting services relating to the net asset
value of each Portfolio of the Fund covered by this Agreement as described
below:
3.1 Account for purchases, sales, exchanges, transfers, dividend
reinvestment and other activity relating to the shares of each
Portfolio as reported by the Fund's Transfer Agent on a daily basis;
3.2 Provide AAL, as Investment Adviser, with a daily report of cash
reserves available for short-term investing;
3.3 Record daily the net investment income (earnings) for each
Portfolio. Account for periodic distributions of earnings to Certificate
Owners of each
Portfolio and maintain undistributed net investment income balances as
of each business day;
3.4 Maintain a general ledger for each Portfolio in the form specified
by AAL and produce a set of financial statements for each Portfolio as
requested from time to time by AAL;
3.5 On each business day of the Fund determine the net asset value of
each Portfolio in accordance with the accounting policies and
procedures described in the current Prospectus of the Fund;
3.6 On each business day of the Fund, calculate the per share net asset
value, per share net earnings and other per share amounts reflective of
the operations of each Portfolio on the basis of the number of shares
outstanding as reported by the Transfer Agent;
3.7 Issue daily reports detailing such per share information of each
Portfolio to such persons (including the Transfer Agent and the
Investment Adviser (AAL) and the distributor (AALCMC)), as directed by
AAL;
3.8 Issue to AAL, monthly reports that document the adequacy of the
accounting detail necessary to support month-end ledger balances for
each Portfolio; and
4. Tax Accounting Services.
AALCMC shall provide the following tax accounting services for each Portfolio of
the Fund covered by this Agreement:
4.1 Maintain tax accounting records for the investment portfolio of
each Portfolio necessary to support Internal Revenue Service tax
reporting requirements for regulated investment companies;
4.2 Maintain tax lot detail for the investment portfolio of each
Portfolio;
4.3 Calculate taxable gains and losses on sales of Portfolio securities
for each Portfolio using the tax cost basis defined for the particular
Portfolio;
4.4 Issue reports to the Transfer Agent of each Portfolio detailing the
taxable components of income and capital gains distributions as
necessary to assist such Transfer Agent in issuing reports to AAL and
the Certificate Owners; and
4.5 Provide any other reports relating to tax matters for each
Portfolio as reasonably requested from time to time by AAL.
SCHEDULE C
Contract Price
Accounting/Pricing Fee Schedule
Pursuant to Section 2.1, the "Contract Price" shall be determined annually. For
the year beginning September 1, 1996 the annual rate will be Thirty-Five
Thousand dollars ($35,000) for each Portfolio.
1996-1997 FUND ACCOUNTING PERFORMANCE STANDARDS
The following is a listing of the fund accounting activities performed
on a daily or periodic basis by AAL Capital Management Corporation, that will be
specifically identified to measure the quality and timeliness of the fund
accounting services provided to AAL by AALCMC pursuant to the Administrative
Services Agreement between the parties dated August 28, 1996.
Daily:
1. Supply the daily cash availability report to the AAL Investment
Department in good form by 8:30 A.M. CST each business day.
2. Meet all industry and SEC guidelines and standards related to:
A. Accounting for the daily portfolio trading activities.
B. Update the general ledger accounts for each portfolio.
3. Supply the NAV proof report to AAL accounting by 8:00 A.M. the
next business day.
4. Obtain the daily fund prices in a timely manner from IDC, by 4:00
P.M.
5. Calculate an accurate daily fund NAV by 4:30 P.M. each business
day.
6. Communicate each fund's NAV to Continuum Vantage the transfer
agent by 5:00 P.M. each business day.
Periodic: 1. Supply the month-end trial balances and the two sets of
the Portfolio Analysis for each fund to AAL accounting by the
first business day of the following month.
2. Supply the Semi-Annual and Annual financial statements and each
corresponding schedule of investments for all the funds by the
fifteenth day of the following month.
3. Supply the monthly SEC Yield Calculation for the Bond and
Balanced portfolios to AAL accounting by the first business day
of the next month.
4. Supply the weekly Money Market portfolio amortized cost versus
market value analysis report to AAL accounting by the next
business day.
5. Supply other accounting information to AAL as requested in a
timely manner.
