Exhibit 5(c)
THE AAL VARIABLE PRODUCT SERIES FUND, INC.
SUB-ADVISORY AGREEMENT FOR THE
THE AAL VARIABLE PRODUCT INTERNATIONAL STOCK PORTFOLIO
WITH
XXXXXXX INTERNATIONAL ADVISORS, LLC
AGREEMENT made this 1st day of September, 1998, by and among the AAL VARIABLE
PRODUCT SERIES FUND, INC. (the "Fund"), a Maryland corporation, AID ASSOCIATION
FOR LUTHERANS (the "Adviser"), a Wisconsin corporation and XXXXXXX INTERNATIONAL
ADVISORS, LLC (the "Sub-Adviser"), a Delaware limited liability corporation.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and among the parties hereto as follows:
1. In General
The Sub-Adviser agrees, as more fully set forth herein, to act as
Sub-Adviser to the Fund with respect to the investment and reinvestment of the
assets of the Fund's series of shares described as the AAL Variable Product
International Stock Portfolio (the "International Stock Portfolio"). It is
understood that the Fund may create one or more additional Fund series from time
to time and that this Agreement may be amended by the mutual written agreement
of the parties to include such additional Portfolio(s) under the terms to this
Agreement.
2. Duties and Obligations of the Sub-Adviser with Respect to
Investment of Assets of The International Stock Portfolio
(a) Subject to the succeeding provisions of this section and subject to
the oversight and review of the Adviser and the direction and control of the
Board of Directors ("Directors") of the Fund, the Sub-Adviser, as agent and
attorney-in-fact with respect to the Fund, is authorized, in its discretion and
with prior consultation with the Fund to:
(i) Buy, sell, exchange, convert, lend and otherwise trade in
any stocks, bonds, currencies, and any other securities or assets;
(ii) Place orders and negotiate the commissions (if any) for
the execution of transactions in securities or other assets with or through such
brokers, dealers, underwriters or issuers as the Sub-Adviser may select;
including brokers and dealers that may be affiliates of the Sub-Adviser, and
(iii) Enter into and execute agreements on behalf of the Fund,
relating to the acquisition or disposition of investment assets and the
execution of portfolio transactions, including foreign exchange contracts and
other transactional agreements. Nothing contained herein, however, shall be
deemed to authorize the Sub-Adviser to take or receive physical possession of
any cash or securities held for the Fund, it being intended that sole
responsibility for safekeeping thereof and the consummation of all such
purchases, sales, deliveries, and investments made pursuant to the Sub-Adviser's
direction shall rest upon the Fund's Custodian.
(iv) Provide the Adviser and the Directors with such reports
as may reasonably be requested in connection with the discharge of the foregoing
responsibilities and the discharge of the Adviser's responsibilities under the
Investment Advisory Agreement with the Fund and those of AAL Capital Management
Corporation (the "Distributor") under the Primary Underwriting Agreement with
the Fund.
Written procedures with respect to (i), (ii) and (iii) above may be set
forth as agreed to among the Fund, the Adviser and Sub-Adviser.
(b) Any investment purchases or sales made by the Sub-Adviser under
this section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment Company Act of
1940 (the "Act") and of any rules or regulations in force thereunder; (2) any
other applicable provisions of law; (3) the provisions of the Articles of
Incorporation and By-Laws of the Fund as amended from time to time; (4) any
policies and determinations of the Board of Directors of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its Registration Statement
under the Act, or as amended by the shareholders of the Fund; provided that
copies of the items referred to in clauses (3), (4) and (5) shall have been
furnished to the Sub-Adviser.
(c) The Sub-Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties ("disabling conduct") hereunder on the part of the
Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Sub-Adviser) the Sub-Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of, or
connected with rendering services hereunder, including without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36 (b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Fund shall indemnify the
Sub-Adviser (and its officers, directors, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Sub-Adviser) against any liability arising from the Sub-Adviser's conduct under
this Agreement to the extent permitted by the Articles of Incorporation and
applicable law.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any
"affiliated person" (as defined in the Act) of the Sub-Adviser from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way limit or restrict the Sub-Adviser or any such affiliated
person from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however, that the Sub-Adviser expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement. It is agreed
that the Sub-Adviser shall have no responsibility or liability for the accuracy
or completeness of the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information supplied by the Sub-Adviser for
inclusion therein. The Sub-Adviser shall be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized, have no
authority to act or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
(e) In connection with its duties to arrange for the purchase and sale
of the International Stock Portfolio's securities and other assets, the
Sub-Adviser shall follow the principles set forth in any investment advisory
agreement in effect from time to time between the Fund and the Adviser, provided
that a copy of any such agreement shall have been provided to the Sub-Adviser.
The Sub-Adviser will promptly communicate to the Adviser and to the officers and
the Directors of the Fund such information relating to portfolio transactions as
they may reasonably request.
(f) The Sub-Adviser may place orders both as to sales and purchases of
assets directly through any broker or dealer it chooses. Brokers or dealers may
be selected who provide brokerage and/or research services to the Fund and/or
other accounts over which the Sub-Adviser or its affiliates exercise investment
discretion. Brokers or dealers who execute portfolio transactions on behalf of
the Fund may receive commissions which are in excess of the amount of
commissions which other brokers or dealers would have charged for effecting such
transactions. In order to cause the Fund to pay such higher commissions, the
Sub-Adviser must determine in good faith that such commissions are reasonable in
relation to the value of the brokerage and/or research services provided by such
executing brokers or dealers viewed in terms of a particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or its other discretionary
client accounts.
(g) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Fund and to
such clients.
The Sub-Adviser may purchase or sell for the Fund, pursuant to the
Fund's Rule 10f-3 Procedures, any security (including securities of the same
class as those underwritten or other securities of the same or related issuer)
for which any affiliate of the Sub-Adviser acts as (1) an underwriter (either as
lead underwriter or syndicate member), both during the pendency of any
underwriting or selling syndicate and thereafter, or (2) a market maker,
provided that such security is purchased from a non-affiliated party.
(h) The Sub-Adviser shall be responsible for 13F reporting for the
securities held by the International Stock Portfolio.
3. Allocation of Expenses
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any) purchased for the
Fund.
The Sub-Adviser agrees that it will furnish the Fund, at the
Sub-Adviser's expense, with all office space, facilities, equipment, and
clerical personnel necessary for carrying out its duties under this Agreement.
4. Certain Records
Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 under the Act that are prepared or
maintained by the Sub-Adviser on behalf of the Fund are the property of the Fund
and will be surrendered promptly to the Fund or Adviser on request.
5. Reference to the Sub-Adviser
Neither the Fund, the Adviser or any affiliate or agent thereof shall
make reference to or use the name of the Sub-Adviser or any of its affiliates in
any advertising or promotional materials without the prior approval of the
Sub-Adviser, which approval shall not be unreasonably withheld.
6. Compensation of the Sub-Adviser
The Adviser agrees to pay the Sub-Adviser and the Sub-Adviser agrees to
accept as full compensation for all services rendered by the Sub-Adviser as
such, a management fee, payable quarterly in arrears and computed on the average
daily net asset value of the International Stock Portfolio at rates shown on
Exhibit A attached hereto.
7. Duration and Termination
(a) This Agreement shall go into effect for the International Stock
Portfolio on the date the transfer of ownership between Xxxxxxx International
Advisors, L.P. and Xxxxxxx International Advisors, LLC takes place, and shall,
unless terminated as hereinafter provided, continue in effect thereafter from
year to year, but only so long as such continuance is specifically approved at
least annually by a majority of the Fund's Board of Directors, or by the vote of
the holders of a "majority" (as defined in the Act) of the outstanding voting
securities of the Fund, with respect to the International Stock Portfolio, and,
in either case, a majority of the Directors who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party cast
in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated by the Sub-Adviser at any time
without penalty upon giving the Fund and the Adviser sixty (60) days' written
notice (which notice may be waived by the Fund and Adviser) and may be
terminated by the Fund or the Adviser at any time without penalty upon giving
the Sub-Adviser sixty (60) days' written notice (which notice may be waived by
the Sub-Adviser), provided that such termination by the Fund shall be directed
or approved by the vote of a majority of all of the Directors in office at the
time or by the vote of the holders of a majority (as defined in the Act) of the
voting securities of the Fund, with respect to the International Stock
Portfolio, or with respect to any Fund by the vote of a majority of the
outstanding shares of such Fund. This Agreement shall automatically terminate in
the event of its "assignment" (as defined in the Act). This Agreement will also
terminate in the event that the Investment Advisory Agreement is terminated.
8. Agreement Binding Only On Fund Property
The Sub-Adviser understands that the obligations of this Agreement are
not binding upon any shareholder of the Fund personally, but bind only the
Fund's property; the Sub-Adviser represents that it has notice of the provisions
of the Fund's Articles of Incorporation disclaiming shareholder liability for
acts or obligations of the Fund.
9. Action By Individual Portfolio
The provisions of this Agreement and any amendments hereto with respect
to a Portfolio may be approved by the shareholders of that Portfolio and become
effective with respect to the assets of that Portfolio without the necessity of
approval thereof by shareholders of any other Portfolio. The Adviser represents
that the holders of a majority (as defined in the "Act") of the International
Stock Portfolio, will approve the entry into this Agreement on behalf of the
Portfolio.
10. Notices
(a) The Sub-Adviser agrees to promptly notify the Adviser of the
occurrence of any of the following events:
(1) any change in any of the Sub-Adviser's members or
portfolio managers;
(2) the Sub-Adviser fails to be registered as an
investment adviser under the Advisers Act or under
the laws of any jurisdiction in which the Sub-Adviser
is required to be registered as an investment adviser
in order to perform its obligations under this
Agreement;
(3) the Sub-Adviser is the subject of any action, suit,
proceeding, inquiry or investigation at law or in
equity, before any court, public board or body,
involving the affairs of the International Stock
Portfolio, or
(4) any change in ownership or control, or membership
of the Sub-Adviser.
(b) Any notice given hereunder shall be in writing and may be served by
being sent by telex, facsimile or other electronic transmission, or sent by
registered mail or by courier to the address set forth below for the party for
which it is intended. A notice served by mail shall be deemed served seven days
after mailing and in the case of telex, facsimile or other electronic
transmission, twelve hours after confirmed receipt thereof. Addresses for notice
may be changed by written notice to the other party.
The Adviser
Xxxx Xxxxxxx, President and Chief Executive Officer
AID ASSOCIATION FOR LUTHERANS
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
Fax (000) 000-0000
The Sub-Adviser
Xxxxxxx Xxxxxx
Xxxxxxx International Advisors, LLC
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Fax (000) 000-0000
No provisions of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
both parties.
The Adviser acknowledges receipt of the Sub-Adviser's Part II,
Form ADV at least 48 hours in advance of signing this Agreement.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule, or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be governed by the laws of the State of
Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the day and year first above written.
ATTEST: THE AAL VARIABLE PRODUCT
SERIES FUND, INC.
---------------------- ---------------------------
Xxxxxxxx X. Xxxxx, Secretary Xxxxxx X. Xxxxx, President
ATTEST: AID ASSOCIATION FOR
LUTHERANS
---------------------- ---------------------------
Xxxxxxx X. Xxx, Senior Vice Xxxx X. Xxxxxxx, President and
President, General Counsel Chief Executive Officer
and Secretary
ATTEST: XXXXXXX INTERNATIONAL
ADVISORS, LLC by its Managing
Member, OECHSLE GROUP, LLC
----------------------- ----------------------------
L. Xxxx Xxxxx, Member Manager
EXHIBIT A
TO
THE AAL VARIABLE PRODUCT SERIES FUND
SUB-ADVISORY AGREEMENT
(Dated September 1, 1998)
1. The AAL Variable Product International Stock Portfolio
The management fee for this Portfolio, payable to the Sub-Adviser by
the Adviser, calculated in accordance with paragraph 6 of The AAL Variable
Product Series Fund Sub-Advisory Agreement, shall be at the annual rate of :
.54 of 1% of the Portfolio's average daily net assets
of $20 million or less;
.45 of 1% of the Portfolio's average daily net assets
between $20 million and $50 million;
.36 of 1% of the Portfolio's average daily net assets
over $50 million.
