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 [ ]
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LB SERIES FUND, INC.
(Name of Registrant as Specified In Its Charter)
LB SERIES FUND, INC.
(Name of Person(s) Filing Proxy Statement)
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LB Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, MN 55415
March 8, 2002
Dear Contract Owner:
Please find enclosed a notice of a Special Meeting of Shareholders of the Opportunity Growth Portfolio, FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio, FI All Cap Portfolio, Growth Portfolio, MFS Investors Growth Portfolio, TRP Growth Stock Portfolio, Value Portfolio, High Yield Portfolio, Income Portfolio, Limited Maturity Bond Portfolio and Money Market Portfolio (collectively, the "Portfolios") of LB Series Fund, Inc. (the "Fund"), which is scheduled for April 10, 2002, together with a proxy statement discussing the matters to be voted on at the meeting and a voting instruction form. Please take the time to read the proxy statement and cast your vote.
On January 1, 2002, Lutheran Brotherhood ("LB") merged with and into Aid Association for Lutherans ("AAL"). The merged organization will begin operating by a new name as soon as possible after the new name is approved by its members and appropriate regulators. In the meantime, the legal name of the organization is AAL, although it does business by the trade name of AAL/LB. LB was the previous investment adviser to the Fund, and the merger resulted in the need for shareholders to approve new investment advisory and subadvisory agreements. The Special Meeting of Shareholders is being held to consider approval of a new investment advisory agreement between the Fund and AAL for each Portfolio and new investment subadvisory agreements for each Portfolio that has an investment subadviser. Shareholders are required to vote on new advisory and subadvisory agreements because the merger of LB and AAL resulted in the termination of the prior advisory and subadvisory agreements. We are asking Contract Owners for voting instructions on the following matters:
- A new investment advisory agreement between the Fund and AAL for all of the Portfolios.
- New investment subadvisory agreements among AAL, the Fund, and each of the investment subadvisers for the FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, MFS Investors Growth Portfolio, FI All Cap Portfolio, TRP Growth Stock Portfolio and World Growth Portfolio.
The advisory fees payable under the proposed advisory and subadvisory agreements are identical to the fees payable under the current agreements.
The Board of Directors has unanimously recommended that contract owners vote for each of the proposals as more fully described in the enclosed proxy statement. Should you have any questions, please feel free to call us at (800) 990-6290. We will be happy to answer any questions you may have.
Your cooperation and participation in completing and returning the enclosed proxy card promptly will ensure that your vote is counted.
Sincerely,
ROLF F. BJELLAND
Chairman
Opportunity Growth Portfolio MFS Investors Growth Portfolio
FTI Small Cap Growth Portfolio TRP Growth Stock Portfolio
MFS Mid Cap Growth Portfolio Value Portfolio
Mid Cap Growth Portfolio High Yield Portfolio
World Growth Portfolio Income Portfolio
FI All Cap Portfolio Limited Maturity Bond Portfolio
Growth Portfolio Money Market Portfolio
Of
LB SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
To Be Held on April 10, 2002
A Special Meeting of Shareholders (the "Special Meeting") of each of the Opportunity Growth Portfolio, FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio, FI All Cap Portfolio, Growth Portfolio, MFS Investors Growth Portfolio, TRP Growth Stock Portfolio, Value Portfolio, High Yield Portfolio, Income Portfolio, Limited Maturity Bond Portfolio and Money Market Portfolio (the "Portfolios"), each a series of LB Series Fund, Inc. (the "Fund"), will be held at the Aid Association for Lutherans/Lutheran Brotherhood building, 625 Fourth Avenue South, Minneapolis, Minnesota on April 10, 2002, at 8:30 a.m. local time for the following purposes:
- To approve a new investment advisory agreement between the Fund and Aid Association for Lutherans ("AAL") with respect to each Portfolio.
- To approve a new investment subadvisory agreement among AAL, the Fund, and the respective investment subadviser as follows:
- Franklin Advisers, Inc. with respect to the FTI Small Cap Growth Portfolio.
- Massachusetts Financial Services Company with respect to the MFS Mid Cap Growth Portfolio and the MFS Investors Growth Portfolio.
- Fidelity Management & Research Company with respect to the FI All Cap Portfolio.
- T. Rowe Price Associates, Inc. with respect to the TRP Growth Stock Portfolio.
- T. Rowe Price International, Inc. with respect to the World Growth Portfolio.
- Franklin Advisers, Inc. with respect to the FTI Small Cap Growth Portfolio.
- To consider and act upon any matter incidental to the foregoing and to transact such other business as may properly come before the Special Meeting and all adjournments.
The Board of Directors of the Fund has fixed the close of business on February 15, 2002 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting and all adjournments.
By Order of the Board of Directors
John C. Bjork, SecretaryMinneapolis, Minnesota
March 8, 2002
YOUR VOTE IS IMPORTANT
You can help the Fund avoid the necessity and expense of sending follow-up letters by promptly returning the enclosed voting instructions. If you are unable to be present in person, please mark, date, sign and return the enclosed voting instructions. The enclosed envelope requires no postage if mailed in the United States. You also may vote by telephone (1-800-597-7836) or the internet (https://vote.proxy-direct.com) by entering the control number on the enclosed voting instruction card.
Opportunity Growth Portfolio MFS Investors Growth Portfolio
FTI Small Cap Growth Portfolio TRP Growth Stock Portfolio
MFS Mid Cap Growth Portfolio Value Portfolio
Mid Cap Growth Portfolio High Yield Portfolio
World Growth Portfolio Income Portfolio
FI All Cap Portfolio Limited Maturity Bond Portfolio
Growth Portfolio Money Market PortfolioOf
LB SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of LB Series Fund, Inc. (the "Fund") to be used at a Special Meeting of Shareholders (the "Special Meeting") of each of the Opportunity Growth Portfolio, FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio, FI All Cap Portfolio, Growth Portfolio, MFS Investors Growth Portfolio, TRP Growth Stock Portfolio, Value Portfolio, High Yield Portfolio, Income Portfolio, Limited Maturity Bond Portfolio and Money Market Portfolio (each, a "Portfolio," and collectively, the "Portfolios") to be held at the Aid Association for Lutherans/Lutheran Brotherhood building, 625 Fourth Avenue South, Minneapolis, Minnesota 55415, on April 10, 2002, at 8:30 a.m. local time and at any adjournments of the Special Meeting.
The following table identifies each proposal set forth in the Notice of Special Meeting of Shareholders and indicates the shareholders of the Portfolios that are being solicited to approve the proposal.
Description of Proposal Portfolios Affected
----------------------- -------------------
1. Approval of a new Investment Advisory Agreement All Portfolios
2. Approval of new Investment Subadvisory Agreements for Certain
Portfolios
A. Franklin Advisers, Inc. FTI Small Cap Growth Portfolio
B. Massachusetts Financial Services Company MFS Mid Cap Growth Portfolio
MFS Investors Growth Portfolio
C. Fidelity Management & Research Company FI All Cap Portfolio
D. T. Rowe Price Associates, Inc. TRP Growth Stock Portfolio
E. T. Rowe Price International, Inc. World Growth Portfolio
Quorum and Voting
Who is entitled to vote?
Shares of the Portfolios are currently sold only to separate accounts (the "Accounts") of Aid Association for Lutherans ("AAL") and Lutheran Brotherhood Variable Insurance Products Company ("LBVIP") to fund benefits under variable life insurance and variable annuity contracts issued by AAL and LBVIP (the "Contracts"). AAL is the investment adviser to the Portfolios and in that capacity also provides certain administrative services to the Portfolios. AAL and LBVIP, as the owners of the assets in the Accounts, will vote all of the shares of the Portfolios in accordance with the properly executed voting instructions of Contract owners. Any such shares of a Portfolio attributable to a Contract for which no timely voting instructions are received, and any shares of that Portfolio held by AAL, LBVIP or any of their affiliates for their own account, will be voted by AAL or LBVIP in proportion to the voting instructions that are received with respect to all Contracts participating in the Portfolio. If the voting instruction form is returned but no instructions are given, the shares of the Portfolio to which the form relates will be voted FOR all the proposals. This Proxy Statement and the accompanying Notice of Special Meeting of Shareholders and Voting Instruction Form are first being mailed on or about March 8, 2002 to Contract owners as of the record date.
The Contract owners permitted to give voting instructions to AAL and LBVIP and the number of shares for which instructions may be given were determined as of February 15, 2002, the record date for the Special Meeting. The table below reflects the total number of shares of each Portfolio issued and outstanding as of the record date.
Portfolio Number of Shares
------------------------------- ----------------------
Opportunity Growth Portfolio 34,639,286.04
FTI Small Cap Growth Portfolio 1,164,984.269
MFS Mid Cap Growth Portfolio 1,221,854.670
Mid Cap Growth Portfolio 41,306,140.963
World Growth Portfolio 43,509,541.34
FI All Cap Portfolio 2,061,894.494
Growth Portfolio 232,724,023.796
MFS Investors Growth Portfolio 1,285,700.457
TRP Growth Stock Portfolio 1,683,523.52
Value Portfolio 2,682,201.67
High Yield Portfolio 186,146,531.968
Income Portfolio 125,262,484.734
Limited Maturity Bond Portfolio 3,897,408.024
Money Market Portfolio 389,250,859.030
Each shareholder is entitled to the same number of votes as the number of full and fractional shares held by such shareholder. Each share is entitled to one vote.
You may vote by mail, telephone or the internet. To vote by mail, date and sign the enclosed voting instruction card and return it in the enclosed postage-paid envelope. To vote by telephone, call 1-800-597-7836. To vote by internet, visit https://vote.proxy-direct.com. For either telephone or internet voting, you will need the control number that appears on your voting instruction card.
Each Portfolio will participate separately in the Special Meeting, although proxies are being solicited through use of a combined Proxy Statement. With respect to Proposal 1 (regarding the approval of a new Investment Advisory Agreement), shareholders of each Portfolio of the Fund will vote separately from each other Portfolio of the Fund. With respect to Proposals 2A through 2E (regarding the approval of new Investment Subadvisory Agreements), only shareholders of the affected Portfolio will be entitled to vote. Shareholders of MFS Mid Cap Growth Portfolio and MFS Investors Growth Portfolio will vote separately on Proposal 2B.
Any Contract owner giving voting instructions may revoke them at any time prior to their use. A Contract owner may change voting instructions by (1) giving written notice of revocation to an officer of the Fund, (2) returning to an officer of the Fund a properly executed later dated voting instruction form, (3) voting later by telephone or internet, or (4) attending the Special Meeting, requesting return of any previously delivered voting instructions and voting in person. Attendance and voting at the Special Meeting will not in and of itself constitute a revocation of voting instructions. Signed voting instructions received by the Board of Directors in time for voting and not so revoked will be voted in accordance with the instructions noted thereon. Unless instructions to the contrary are marked on the Voting Instruction Form, the voting instructions will be voted FOR all the proposals. The Voting Instruction Form grants discretion to the persons named thereon, as proxies, to take such further action as they may determine appropriate in connection with any other matter which may properly come before the Special Meeting or any adjournments. The Board of Directors does not currently know of any matter to be considered at the Special Meeting other than the matters set forth in the Notice of Special Meeting of Shareholders.
What is the requirement for a quorum?
For purposes of considering each of the Proposals, a majority of the aggregate number of shares of the Portfolio entitled to vote constitutes a quorum.
What is the voting requirement to pass each Proposal?
Approval of each Proposal requires the affirmative vote of the holders of a "majority of the outstanding voting securities" of the Portfolio entitled to vote on the proposal, as such term is defined in the Investment Company Act of 1940, as amended ("1940 Act"). For that purpose, a vote of the holders of a "majority of the outstanding voting securities" of the Portfolio means the lesser of (1) the vote of 67% or more of the shares of the Portfolio present at the Special Meeting if the holders of more than 50% of the outstanding Portfolio shares are present or represented by proxy, or (2) the vote of the holders of more than 50% of the outstanding shares of the Portfolio.
How is this proxy statement being solicited?
The Board of Directors expects to make this solicitation primarily by mail. However, in addition to the solicitation of voting instructions by mail, the officers of the Fund and members of the Board of Directors and persons affiliated with AAL, the Fund's investment adviser, may, without remuneration, solicit voting instructions personally or by telephone, telegram or other electronic means. The Fund may also retain a proxy solicitation firm to assist in any special, personal solicitation of voting instructions. The costs of solicitation and expenses incurred in connection with preparing this Proxy Statement, including any cost of retaining a proxy solicitation firm, will be borne by AAL.
Additional Information About the Portfolios
The financial statements of each Portfolio for the year ended December 31, 2001 are included in the Fund's annual report for the year ended December 31, 2001, which has been previously sent to Contract owners. THE FUND WILL FURNISH UPON REQUEST AND WITHOUT CHARGE TO ANY CONTRACT OWNER A COPY OF SUCH REPORT. A CONTRACT OWNER MAY OBTAIN A COPY OF SUCH REPORT BY WRITING TO LB SERIES FUND, INC., 625 FOURTH AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55415 OR BY CALLING TOLL-FREE (800) 990-6290.
As of February 15, 2002, the following persons or entities were the beneficial and/or record owners of 5% or more of the shares of the indicated Portfolio:
Opportunity Growth Portfolio FTI Small Cap Growth Portfolio MFS Mid Cap Growth Portfolio
- ---------------------------- --------------------------------- ---------------------------------- ---------------------------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Number % of Number % of Number % of
Shareholder of Shares Outstanding of Shares Outstanding of Shares Outstanding
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 12,080,639.32 34.88% 362,018.26 31.07% 420,813.51 34.44%
Variable Insurance
Products Company - LBVIP
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 1,161,278.76 3.35% N/A N/A N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood N/A N/A N/A N/A N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account II
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 19,756,600.62 57.04% 802,966.010 68.93% 801,041.16 65.56%
Lutherans - LB Variable
Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 1,640,767.34 4.74% N/A N/A N/A N/A
Lutherans - LB Variable
Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Mid Cap Growth Portfolio World Growth Portfolio FI All Cap Portfolio
- ---------------------------- --------------------------------- ---------------------------------- ---------------------------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Number % of Number % of Number % of
Shareholder of Shares Outstanding of Shares Outstanding of Shares Outstanding
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 14,371,688.76 34.79% 15,185,196.92 34.90% 747,966.346 36.28%
Variable Insurance
Products Company - LBVIP
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 859,940.550 2.08% 1,105,466.04 2.54% N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood N/A N/A N/A N/A N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account II
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 24,855,000.859 60.17% 25,653,858.73 58.96% 1,313,928.148 63.72%
Lutherans - LB Variable
Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 1,219,510.792 2.95% 1,565,019.65 3.60% N/A N/A
Lutherans - LB Variable
Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Growth Portfolio MFS Investors Growth Portfolio TRP Growth Stock Portfolio
- ---------------------------- --------------------------------- ---------------------------------- ---------------------------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Number % of Number % of Number % of
Shareholder of Shares Outstanding of Shares Outstanding of Shares Outstanding
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 115,600,221.00 49.67% 444,293.20 34.56% 606,386.66 36.02%
Variable Insurance
Products Company - LBVIP
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 8,296,928.611 3.57% N/A N/A N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 97,604.747 0.04% N/A N/A N/A N/A
Variable Insurance
Products Company - LBVIP
Variable Insurance Account II
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 102,975,335.806 44.25% 841,407.257 65.44% 1,077,136.86 63.98%
Lutherans - LB Variable
Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 5,753,933.636 2.47% N/A N/A N/A N/A
Lutherans - LB Variable
Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Value Portfolio High Yield Portfolio Income Portfolio
- ---------------------------- --------------------------------- ---------------------------------- ---------------------------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Number % of Number % of Number % of
Shareholder of Shares Outstanding of Shares Outstanding of Shares Outstanding
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood 1,025,916.71 38.25% 88,849,261.62 47.73% 63,973,096.25 51.07%
Variable Insurance
Products Company - LBVIP
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood N/A N/A 5,083,638.482 2.73% 2,151,837.356 1.72%
Variable Insurance
Products Company - LBVIP
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Lutheran Brotherhood N/A N/A 67,129.046 0.04% 37,141.344 0.03%
Variable Insurance
Products Company - LBVIP
Variable Insurance Account II
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for 1,656,284.96 61.75% 87,755,995.926 47.14% 57,451,158.981 45.86%
Lutherans - LB Variable
Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Aid Association for N/A N/A 4,390,506.891 2.36% 1,649,250.803 1.32%
Lutherans - LB Variable
Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ---------------- ---------------- ----------------
Limited Maturity Bond Portfolio Money Market Portfolio
- ---------------------------- --------------------------------- ----------------------------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Number % of Number % of
Shareholder of Shares Outstanding of Shares Outstanding
- ---------------------------- ---------------- ---------------- ----------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Lutheran Brotherhood 1,136,231.68 29.15% 153,555,178.08 39.45%
Variable Insurance
Products Company - LBVIP
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Lutheran Brotherhood N/A N/A 5,256,270.06 1.35%
Variable Insurance
Products Company - LBVIP
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Lutheran Brotherhood N/A N/A 27,763.51 0.01%
Variable Insurance
Products Company - LBVIP
Variable Insurance Account II
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Aid Association for 2,761,176.347 70.85% 225,100,451.48 57.83%
Lutherans - LB Variable
Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ----------------
- ---------------------------- ---------------- ---------------- ----------------- ----------------
Aid Association for N/A N/A 5,311,195.90 1.36%
Lutherans - LB Variable
Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
- ---------------------------- ---------------- ---------------- ----------------- ----------------
PROPOSAL 1 - Approval of New Investment Advisory Agreement
Why are Contract owners being asked to give voting instructions for a new investment advisory agreement?
Contract owners are being asked to give voting instructions to approve a new investment advisory agreement between the Fund and AAL (the "Proposed Agreement") for each Portfolio. The Proposed Agreement is attached as Exhibit A to this Proxy Statement. Lutheran Brotherhood ("LB") served as the investment adviser for each Portfolio of the Fund until January 1, 2002, pursuant to investment advisory agreements between the Fund and LB dated January 31, 1994 (with respect to the Growth Portfolio, High Yield Portfolio, Income Portfolio, and Money Market Portfolio); January 16, 1996 (with respect to the Opportunity Growth Portfolio and the World Growth Portfolio); January 30, 1998 (with respect to the Mid Cap Growth Portfolio); and November 30, 2001 (with respect to the FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, MFS Investors Growth Portfolio, FI All Cap Portfolio, TRP Growth Stock Portfolio, Value Portfolio, and Limited Maturity Bond Portfolio (the "New Portfolios")) (collectively, the "Prior Agreements"). On January 1, 2002, LB merged with and into AAL. The January 1, 2002 merger resulted in an "assignment" of the Prior Agreements under the 1940 Act and, consequently, caused the Prior Agreements to terminate automatically. To avoid disruption of the Fund's investment management program, on December 5, 2001, the Board of Directors, in accordance with Rule 15a-4 under the 1940 Act ("Rule 15a-4"), approved an interim agreement between AAL and the Fund with respect to each Portfolio for up to a 150-day period following January 1, 2002 (the "Current Agreement"). Under the Current Agreement, AAL serves as the investment adviser to each Portfolio. The terms and conditions of the Current Agreement are identical to the terms and conditions of the Prior Agreements except for certain provisions required under Rule 15a-4. The Current Agreement will continue until the earlier of May 30, 2002 (the end of the 150-day period) or until the Proposed Agreement is approved by shareholders of the Portfolio prior to that date. The Proposed Agreement will become effective on the date that it is approved by shareholders of the Portfolio. The address of AAL is 625 Fourth Avenue South, Minneapolis, Minnesota 55415.
How does the Proposed Agreement differ from the Current Agreement?
There are no changes in the advisory fees payable between the Current Agreement and the Proposed Agreement. The services to be provided under the Proposed Agreement are substantially identical to the services provided under the Current Agreement. Under the Current Agreement with respect to each Portfolio and the Proposed Agreement, the adviser is responsible for establishing a continuous program of investment supervision for each of the Portfolios of the Fund, subject to the overall direction of the Fund's Board of Directors. The Current Agreement and Proposed Agreement allow the investment adviser to enter into investment subadvisory agreements with one or more investment subadvisers for each of the Portfolios. With respect to the New Portfolios, the Current Agreement requires the adviser to establish the overall investment strategy for a subadvised Portfolio; evaluate, select, and recommend a subadviser for such Portfolio, subject to the Board of Directors of the Fund; allocate assets to such subadviser; monitor the performance, security holdings, and investment strategies of the subadviser; and, when appropriate, recommend any potential new subadviser for the Portfolio. The Proposed Agreement extends these requirements to each of the Portfolios.
The Current Agreement and the Proposed Agreement also provide that the investment adviser, its officers, directors, or employees will only be liable to the Fund or Portfolios for losses resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duty.
The Proposed Agreement differs from the Current Agreement for each Portfolio, except the New Portfolios, in that the Board of Directors may amend the Proposed Agreement to reduce the advisory fees payable to AAL without the necessity of shareholder approval. The Current Agreement also includes certain provisions required under Rule 15a-4 that will not be applicable to the Proposed Agreement. Specifically, under the Current Agreement, the advisory fees payable to AAL (less, in the case of a subadvised Portfolio, the amount payable to the subadviser) are being held in an interest-bearing escrow account. If the Proposed Agreement is approved by shareholders, these escrowed funds, including interest, will be paid to AAL. If the Proposed Agreement is not approved, AAL will be entitled to an amount equal to the lesser of (a) its costs of performing its services during the term of the Current Agreement plus interest and (b) such amount in the escrow account plus interest. In addition, as required under Rule 15a-4, the Current Agreement may be terminated by the Board of Directors or by a majority of the outstanding voting securities of the Portfolios at any time without penalty on 10 days' written notice.
The Proposed Agreement will continue in effect for two years following its effective date and thereafter from year to year as long as it is approved annually by the Board of Directors or by vote of a majority of the Portfolio's outstanding voting securities (within the meaning of the 1940 Act). The Proposed Agreement is subject to termination without penalty on 60 days' written notice by either party to the other and will terminate automatically in the event of its assignment.
What matters were considered by the Board of Directors in recommending the Proposed Agreement?
On December 5, 2001, the Board of Directors of the Fund (the "Board"), including the directors who are not "interested persons" of AAL or the Fund ("Independent Directors"), unanimously voted to approve the Proposed Agreement. In connection with its consideration of the Proposed Agreement, the Board requested that management provide the Board with certain information regarding the anticipated impact of the merger of AAL and LB on the Portfolios. In response, LB provided information to the Board regarding the expected impact of the merger on the investment personnel responsible for the management and operations of the Portfolios, the nature and scope of advisory services provided to the Portfolios, the identity of other service providers to the Portfolios, and the manner in which the Portfolios are marketed and distributed. The Board noted that the board of directors of the combined organization following the merger would consist of an equal number of directors from each of AAL and LB and that the senior management team would include officers from both organizations. The Board also noted that, although there would be a new chief investment officer for AAL following the merger, there were no plans to change the individuals with day-to-day responsibility for investment management of the Portfolios upon completion of the merger, although it was also noted that there could be portfolio management changes in the future as the combined organization integrated the investment personnel of AAL and LB. The Board also noted that the merger would not result in any changes to the service providers or distribution and marketing arrangements for the Portfolios, although it was anticipated that there could be future changes in the identity of service providers and distribution and marketing arrangements resulting from the expected integration of the LB and AAL organizations. The Board also took into account the fact that AAL had agreed to bear any expenses incurred by the Fund as a result of the merger, including the expenses of the Special Meeting. The Board also noted that AAL and LB had undertaken to satisfy the provisions of Section 15(f) under the 1940 Act, which would require that (i) at least 75% of the Fund's directors consist of individuals that are not "interested persons" of the Fund for the 3-year period following the merger and (ii) that no unfair burden be imposed on the Portfolios during the 2-year period following the merger. After reviewing all of these factors, the Board unanimously approved the Proposed Agreement and recommended that shareholders of the Fund approve the Proposed Agreement.
When was the Current Agreement last submitted to shareholders?
The Current Agreement has not been previously submitted to shareholders. The Prior Agreement dated January 31, 1994 (with respect to the Growth Portfolio, High Yield Portfolio, Income Portfolio, and Money Market Portfolio) was last submitted to shareholders on October 28, 1993, when the shareholders were asked to initially approve the agreement. The Prior Agreements dated January 16, 1996, January 30, 1998, and November 30, 2001 were approved by the initial shareholders at the time of each Portfolio's inception. The Current Agreement was last approved by the Directors of the Fund on December 5, 2001.
What are the investment advisory fees for the Portfolios of the Fund?
The investment advisory fees payable to AAL under the Proposed Agreement are the same as the investment advisory fees payable to LB under the Prior Agreements and the Current Agreement. The advisory fees are expressed in the following table as a percentage of the Portfolio's net assets.
Portfolio Advisory Fee
----------------------------- ------------
Opportunity Growth Portfolio . . . . . . . . . . . . . . . .40%
FTI Small Cap Growth Portfolio
$0-$500 million . . . . . . . . . . . . . . . . . . . . 1.00%
More than $500 million . . . . . . . . . . . . . . . . .90%
MFS Mid Cap Growth Portfolio
$0-$500 million . . . . . . . . . . . . . . . . . . . . .90%
More than $500 million . . . . . . . . . . . . . . . . . .80%
Mid Cap Growth Portfolio . . . . . . . . . . . . . . . . . .40%
World Growth Portfolio . . . . . . . . . . . . . . . . . . . .85%
FI All Cap Portfolio
$0-$500 million . . . . . . . . . . . . . . . . . . . . . .95%
More than $500 million . . . . . . . . . . . . . . . . . .90%
Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . .40%
MFS Investors Growth Portfolio
$0-$500 million . . . . . . . . . . . . . . . . . . . . . .80%
More than $500 million . . . . . . . . . . . . . . . . . .70%
TRP Growth Stock Portfolio
$0-$500 million . . . . . . . . . . . . . . . . . . . . . .80%
More than $500 million . . . . . . . . . . . . . . . . . .70%
Value Portfolio . . . . . . . . . . . . . . . . . . . . . . .60%
High Yield Portfolio . . . . . . . . . . . . . . . . . . . . .40%
Income Portfolio . . . . . . . . . . . . . . . . . . . . . . .40%
Limited Maturity Bond Portfolio . . . . . . . . . . . . . . .40%
Money Market Portfolio . . . . . . . . . . . . . . . . . . . .40%
During the fiscal year ended December 31, 2001, the Fund paid LB the following total dollar amounts under the Prior Agreements for the investment advisory services it provided to the Portfolio:
Portfolio Advisory Fee
----------------------------- -------------
Opportunity Growth Portfolio $ 1,498,583
FTI Small Cap Growth Portfolio 1,601
MFS Mid Cap Growth Portfolio 1,694
Mid Cap Growth Portfolio 2,086,534
World Growth Portfolio 1,885,799
FI All Cap Portfolio 1,388
Growth Portfolio 15,736,342
MFS Investors Growth Portfolio 1,453
TRP Growth Stock Portfolio 1,360
Value Portfolio 2,653
High Yield Portfolio 4,403,613
Income Portfolio 4,702,608
Limited Maturity Bond Portfolio 6,787
Money Market Portfolio 1,477,791
AAL also serves as the investment adviser for AAL Variable Product Series Fund, Inc., which has a number of portfolios with investment objectives similar to certain Portfolios of the Fund. The relevant information concerning the portfolios of AAL Variable Product Series Fund, Inc. is set forth in the following table.
Net Assets
of Fund at Annual Rate of Compensation Fees
Name of Fund Investment Objective 12/31/01 (% of average net assets) Waived or
(in thousands) Reduced
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Technology Stock Seeks long-term capital appreciation $8,725 0.75% No
Portfolio by investing primarily in a
diversified portfolio of common
stocks and securities convertible
into common stocks.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Aggressive Growth Seeks long-term capital appreciation $8,382 0.80% of the first $100 million No
Portfolio by investing primarily in a 0.75% of the next $400 million
diversified portfolio of common 0.70% above $500 million
stocks and securities convertible
into common stocks.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Small Cap Index Strives for capital growth that $324,676 0.35% of the first $250 million No
Stock Portfolio approximates the performance of the 0.30% above $250 million
S&P SmallCap 600 Index, by investing
primarily in common stocks of the
Index.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Small Cap Stock Seeks long-term capital growth by $23,642 0.70% of the first $200 million No
Portfolio investing primarily in small company 0.65% above $200 million
common stocks and securities
convertible into small company common
stocks.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Mid Cap Stock Seeks long-term capital growth by $21,428 0.70% of the first $200 million No
Portfolio investing primarily in common stocks 0.65% of the next $800 million
and securities convertible into 0.60% above $1 billion
common stocks of mid-sized companies.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Mid Cap Index Seeks total returns that track the $14,262 0.35% of the first $250 million No
Portfolio performance of the S&P MidCap 400 0.30% above $250 million
Index by investing in common stocks
comprising the Index.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL International Strives for long-term capital growth $60,870 0.80% No
Portfolio by investing primarily in foreign
stocks.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Capital Growth Seeks long-term capital growth by $51,401 0.65% of the first $500 million No
Portfolio investing primarily in a diversified 0.575% of the next $500 million
portfolio of stocks and securities 0.50% of the next $4 billion
convertible into common stocks. 0.45% above $5 billion
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Large Company Strives for investment results that $755,858 0.35% of the first $250 million No
Index Portfolio approximate the performance of the 0.30% above $250 million
S&P 500 Index by investing primarily
in common stocks of the Index.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Equity Income Seeks current income, long-term $17,057 0.45% No
Portfolio income growth and capital growth by
investing primarily in a diversified
portfolio of income-producing equity
securities.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Balanced Portfolio Seeks capital growth and income by $745,300 0.35% of the first $250 million No
investing in a mix of common stocks, 0.30% above $250 million
bonds and money market instruments.
Securities are selected consistent
with the policies of the Large
Company Index, Bond Index and Money
Market Portfolio.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL High Yield Bond Strives for high current income and $34,419 0.40% No
Portfolio secondarily capital growth by
investing primarily in high risk,
high yield bonds commonly referred to
as "junk bonds."
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Bond Index Strives for investment results $99,364 0.35% of the first $250 million No
Portfolio similar to the total return of the 0.30% above $250 million
Lehman Aggregate Bond Index by
investing primarily in bonds and
other debt securities included in the
Index.
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AAL Money Market Strives for maximum current income $52,861 0.35% of the first $250 million No
Portfolio while maintaining liquidity and a 0.30% above $250 million
constant net asset value of $1.00 per
share, by investing in high-quality,
short-term money market instruments.
Information About AAL
Who is the principal executive officer and who are the directors of AAL?
The name, address, and principal occupation of each director of AAL are:
Name Address Principal Occupation
- ---- ------- --------------------
Principal Executive
Officer and Director:
- --------------------
Bruce J. Nicholson 625 Fourth Avenue South President and Chief Executive Officer
Minneapolis, MN 55415 Aid Association for Lutherans
Directors:
- ---------
John O. Gilbert 625 Fourth Avenue South Chairman of the Board
Minneapolis, MN 55415 Aid Association for Lutherans
Richard E. Beumer 501 North Broadway Vice Chairman
St. Louis, MO 63102 Jacobs Engineering Group, Inc.
Dr. Addie J. Butler 1700 Spring Garden Street Assistant to the Vice President
Philadelphia, PA 19130 Community College of Philadelphia
Elizabeth A. Duda 2450 Mikler Road Self-Employed
Oviedo, FL 32765
Gary J. Greenfield 8830 W. Bluemound Road President
Milwaukee, WI 53226 Wisconsin Lutheran College
Robert H. Hoffman 1725 Roe Crest Drive Group Vice President -
P.O. Box 37208 Communication Division
North Mankato, MN 56002 Taylor Corporation
James M. Hushagen 1201 Pacific Avenue, Suite Partner
1200 Eisenhower & Carlson, PLLC
Tacoma, WA 98402
Richard C. Lundell 9993 East Purdue President
Scottsdale, AZ 85258 Lundell Financial Group
John P. McDaniel 5565 Sterrett Place Chief Executive Officer
Columbia, MD 21044 MedStar Health
Paul W. Middeke 55 Forest Valley Court Retired Partner
St. Charles, MO 63301 Ernst & Young, LLP
Robert B. Peregrine W. Wisconsin Ave., Suite 1300 President
Milwaukee, WI 53202 Peregrine & Roth, S.C.
Paul D. Schrage 42237 North 112th Place Retired Senior Executive Vice
Scottsdale, AZ 85262 President
McDonald's Corporation
Dr. Kurt M. Senske 408 West 45th Street President and CEO
Austin, TX 78751 Lutheran Social Services
Dr. Albert K. Siu Room 31A19 Chief Learning Officer
55 Corporate Drive AT&T
Bridgewater, NJ 08807
Roger G. Wheeler 6109 West 104th Street President
Bloomington, MN 55438 Wheeler-Air, Inc.
Thomas R. Zehnder 6308 Chiswick Park Retired Pastor
Williamsburg, VA 23188Are any officers and directors of the Fund affiliated with AAL?
Officers and directors of the Fund who are affiliated with AAL and the nature of their affiliation are listed below.
Officer/Director Name Position with the Fund Position with AAL
- --------------------- ---------------------- -----------------
Pamela J. Moret President Senior Vice President, Marketing and
Products
Wade M. Voigt Treasurer and Principal Investment Accounting Manager
Accounting Officer
John C. Bjork Secretary Counsel
James H. Abitz Vice President Senior Vice President, Investments
Frederick P. Johnson Vice President Head of Investment Operations
Brenda J. Pederson Vice President Head of Production Operation Services
Richard B. Ruckdashel Vice President Marketing and Distribution Manager
Recommended Shareholder Action
The Board of Directors, including the Independent Directors, unanimously recommends that shareholders vote FOR approval of the Proposed Agreement.
PROPOSAL 2 - Approval of New Investment Subadvisory Agreements
Why are Contract owners being asked to give voting instructions for new investment subadvisory agreements?
Contract owners are being asked to give voting instructions to approve a new investment subadvisory agreement among AAL, the Fund, and each investment subadviser as follows:
- Franklin Advisers, Inc., One Franklin Parkway, San Mateo, California 94403, with respect to the FTI Small Cap Growth Portfolio.
- Massachusetts Financial Services Company, 500 Boylston Street, Boston, Massachusetts 02116, with respect to the MFS Mid Cap Growth Portfolio and the MFS Investors Growth Portfolio.
- Fidelity Management & Research Company, 82 Devonshire Street, Boston, Massachusetts 02109, with respect to the FI All Cap Portfolio.
- T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202, with respect to the TRP Growth Stock Portfolio.
- T. Rowe Price International, Inc., 100 East Pratt Street, Baltimore, Maryland 21202, with respect to the World Growth Portfolio.
Contract owners are being asked to give voting instructions to approve new investment subadvisory agreements (collectively, the "Proposed Subadvisory Agreements") for the FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, MFS Investors Growth Portfolio, FI All Cap Portfolio, TRP Growth Stock Portfolio, and World Growth Portfolio (collectively, the "Subadvised Portfolios"). The Proposed Subadvisory Agreements are attached as Exhibits B-F to this Proxy Statement. LB served as investment adviser to FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, MFS Investors Growth Portfolio, FI All Cap Portfolio, and TRP Growth Stock Portfolio since their inception on November 30, 2001 until January 1, 2002, and it served as investment adviser to the World Growth Portfolio since its inception on January 16, 1996 until January 1, 2002. The merger of LB and AAL on January 1, 2002, resulted in an assignment of the investment subadvisory agreements by and among LB, the Fund, and each subadviser (collectively, the "Prior Subadvisory Agreements") under the 1940 Act and, consequently, caused the Prior Subadvisory Agreements to terminate automatically. To avoid disruption of the investment management programs of these Subadvised Portfolios, the Board approved interim subadvisory agreements for up to a 150-day period following January 1, 2002 (the "Current Subadvisory Agreements"). The terms and conditions of the Current Subadvisory Agreements are identical to the terms and conditions of the Prior Agreements except for certain provisions required under Rule 15a-4. The Current Subadvisory Agreements will terminate automatically on May 30, 2002 (the end of this 150-day period).
How do the Proposed Subadvisory Agreements differ from the Current Subadvisory Agreements?
The scope of services under the Proposed Subadvisory Agreements is identical to the services under the Current Subadvisory Agreements for the respective Subadvised Portfolios. The fees payable to the subadvisers under those Proposed Subadvisory Agreements are the same as the fees payable under the Prior Subadvisory Agreements.
Each Current Subadvisory Agreement includes certain provisions required by Rule 15a-4 under the 1940 Act that will not be applicable to the Proposed Subadvisory Agreement. Specifically, under the Current Subadvisory Agreements, a portion of the advisory fee payable by the Fund to AAL equal to the investment subadvisory fees due the subadvisers is being held in an interest-bearing escrow account. AAL has separately agreed to pay each respective subadviser out of its own assets an amount equal to the subadvisory fees that would otherwise have been payable to each subadviser under the terms of the Current Subadvisory Agreements.
The term of each Current Subadvisory Agreement will continue until the earlier of May 30, 2002 or until the Proposed Subadvisory Agreement is approved by shareholders of the Portfolio. The Proposed Subadvisory Agreements will continue for two years following its effective date and thereafter if approved annually by (i) a majority of the Directors, including the Independent Directors or (ii) a majority of the outstanding voting securities of the Portfolio. In addition, as required under Rule 15a-4, the Current Subadvisory Agreements may be terminated by the Board of Directors or by a majority of the outstanding voting securities of the Portfolios at any time without penalty on 10 day's written notice. If the Proposed Subadvisory Agreements are approved by shareholders, the escrowed funds, including interest, will be paid to AAL. If a Proposed Subadvisory Agreement is not approved, AAL will be entitled to an amount equal to the lesser of (a) its costs of performing its services during the interim period plus interest and (b) the amount in the escrow account plus interest.
What matters were considered by the Board in recommending the new subadvisory agreements?
On December 5, 2001, the Board, including the Independent Directors, unanimously voted to approve the Proposed Subadvisory Agreements. In authorizing the Proposed Subadvisory Agreements, the Board noted the termination of the Prior Subadvisory Agreements for the Subadvised Portfolios was caused by the merger of AAL and LB, and not by any action of the subadvisers; there would be no changes in the organization and personnel with day-to-day responsibility for the investment management of the Subadvised Portfolios; and the scope of services and fees payable under the Proposed Subadvisory Agreements would be identical to the services and fees under the Prior Subadvisory Agreements. The Board also considered AAL's assurance that the merger would not affect the investment approach or operations of the Subadvised Portfolios of the Fund. After reviewing all of these factors, the Board unanimously recommended that shareholders of the affected Portfolios approve the Proposed Subadvisory Agreements.
When were the Prior Subadvisory Agreements last submitted to Shareholders?
The Current Subadvisory Agreements have not been previously approved by shareholders. The Prior Subadvisory Agreements for the FTI Small Cap Growth Portfolio, MFS Mid Cap Growth Portfolio, MFS Investors Growth Portfolio, FI All Cap Portfolio, and TRP Growth Stock Portfolio were approved by the initial shareholders at the time of each Portfolio's inception and were last approved by the Directors of the Fund on September 12, 2001, when they were initially authorized. The Prior Subadvisory Agreement for the World Growth Portfolio was last submitted to shareholders on November 14, 2000, at a meeting held to consider whether to approve a new subadvisory agreement that was necessary because of a change of control in the subadviser. The Prior Subadvisory Agreement for the World Growth Portfolio was last approved by the Directors of the Fund on December 5, 2001.
What are the investment subadvisory fees for the Subadvised Portfolios?
The investment subadvisory fees payable to each subadviser under the Current Subadvisory Agreements are the same as the investment subadvisory fees payable to each subadviser under the Prior Subadvisory Agreements. The fees payable by AAL for investment subadvisory services are expressed below as a percentage of the Portfolio's net assets.
Average Net Annual
Subadviser Portfolio Daily Assets Rate
- ---------- --------- ------------ ----
Proposal 2A:
Franklin Advisers, Inc. FTI Small Cap Growth Portfolio $0 - $200 million 0.60%
$200 - $500 million 0.52%
Above $500 million 0.50%
Proposal 2B:
Massachusetts Financial MFS Mid Cap Growth Portfolio $0 - $100 million 0.475%
Services Company $100 - $500 million 0.42%
Above $500 million 0.35%
MFS Investors Growth Portfolio $0 - $100 million 0.425%
$100 - $500 million 0.40%
Above $500 million 0.35%
Proposal 2C:
Fidelity Management & FI All Cap Portfolio $0 - $100 million 0.60%
Research Company $100 - $500 million 0.55%
$500 - $750 million 0.50%
Above $750 million 0.45%
Proposal 2D:
T. Rowe Price Associates, TRP Growth Stock Portfolio $0 - $50 million 0.45%
Inc. $50 - $500 million 0.40%
Above $500 million 0.35%
Proposal 2E:
T. Rowe Price World Growth Portfolio $0 - $20 million (1) 0.75%
International, Inc. Above $20 - $50 million (1) 0.60%
Above $50 - $200 million (1)0.50%
Above $200 million (1,2) 0.50%
Above $500 million (1,2) 0.45%
During the fiscal year ended December 31, 2001, LB paid the following total dollar amounts to the subadvisers under the Prior Subadvisory Agreements for investment subadvisory services to the Portfolios:
Subadviser Portfolio Subadvisory Fees
- ---------- --------- ----------------
Proposal 2A:
Franklin Advisers, Inc. FTI Small Cap Growth $ 2,401
Portfolio3
Proposal 2B:
Massachusetts Financial MFS Mid Cap Growth Portfolio(3) 1,893
Services Company
MFS Investors Growth 1,647
Portfolio(3)
Proposal 2C:
Fidelity Management & FI All Cap Portfolio(3) 2,380
Research Company
Proposal 2D:
T. Rowe Price Associates, TRP Growth Stock Portfolio(3) 1,748
Inc.
Proposal 2E:
T. Rowe Price World Growth Portfolio 2,121,523
International, Inc.
Each of the above Portfolio's subadvisers acts as investment adviser and subadviser for a number of other funds with similar investment objectives. The following table sets forth relevant information with respect to each fund for which each Portfolio's subadviser acts as investment adviser or subadviser.
Fees
Fiscal Net Assets Waived
Year of Fund(5) Annual Rate or
Name of Fund Investment Objective End(4) (in millions) of Compensation(6) Reduced
- --------------------------------------------------------------------------------------------------------------------------------
Franklin Advisers, Inc.:
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Growth II Fund Long-term capital growth $1,445.4 1.32% Yes
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin Institutional Small Cap Long-term capital growth .85% on first $25 million No
Fund $ 1.7 .80% on next $25 million
.70% above $50 million
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin U.S. Smaller Companies Long-term capital growth Management Fee: 1.00% No
Fund $ 1.2 Maintenance Charge: up to .50%
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Massachusetts Financial
Services Company:
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Mid Cap Growth Fund Long-term growth of $2,575.2 .75% No
capital
- ---------------------------------------------------------------------------------------------------------------------------------
ING Long-term growth of $1,140.1(7) .35% on first $500 million of No
GCG Trust Mid Cap Growth Portfolio capital aggregate average daily
net assets
.30% on next $1 billion
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Travelers Long-term growth of $ 278.6(7) .375% No
Travelers/MFS Mid Cap Growth capital
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
SunAmerica Long-term growth of $ 316.0(7) .40% on first $300 million No
MFS Mid Cap Growth Portfolio capital .375% on next $300 million
.35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Prudential Long-term growth of $ 16.2(7) .40% on first $300 million No
Strategic Partners MFS Mid Cap capital .375% on next $300 million
Growth .35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Pacific Life Long-term growth of $ 98.8(7) .40% on first $300 million No
Pacific Select Mid Cap Growth capital .375% on next $300 million
Portfolio .35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Pacific Life Long-term growth of $ 10.6(7) .40% on first $300 million No
Pacific Funds Mid Cap Growth capital .375% on next $300 million
Portfolio .35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Metlife Long-term growth of $ 36.8(7) .40% on first $150 million No
MFS Mid Cap Growth Portfolio capital .375% on next $150 million
.35% above $300 million
- ---------------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Long-term growth of $14,412.1 .33% No
Fund capital and future income
- ---------------------------------------------------------------------------------------------------------------------------------
Mass Mutual Long-term growth of $ 44.8(7) .40% on first $300 million No
MML Growth Equity Fund capital and future income .375% on next $300 million
.35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Mass Mutual Long-term growth of $ 444.1(7) .40% on first $300 million No
Mass Mutual Growth Equity Pension capital and future income .375% on next $300 million
Fund .35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
American Skandia Long-term growth of $ 979.2(7) .40% on first $300 million No
AST/MFS Growth Portfolio capital and future income .375% on next $300 million
.35% on next $300 million
.325% on next $600 million
.25% above $1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Fortis Financial Long-term growth of $ 18.6(7) .50% on first $200 million No
Fortis Series Fund Investors capital and future income .45% on $100 - $500 million
Growth Series .40% above $500 million
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix Life Long-term growth of $ 3.9(7) .375% on first $500 million No
Phoenix Edge Series MFS Investors capital and future income .35% on next $400 million
Growth Stock Series .325 on next $600 million
.25% above 1.5 billion
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Management
& Research Company ("FMR"):
- --------------------------------------------------------------------------------------------------------------------------------
Funds advised by FMR
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Dividend Growth:(8,9) Growth No
Class A 11/30/00 $ 42.2 0.58%
Class T 11/30/00 260.8 0.58%
Class B 11/30/00 250.6 0.58%
Class C 11/30/00 147.6 0.58%
Institutional Class 11/30/00 30.7 0.58%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Dynamic Capital Growth No
Appreciation:(8,9)
Class A 11/30/00 $ 20.9 0.57%
Class T 11/30/00 181.3 0.57%
Class B 11/30/00 86.1 0.57%
Class C 11/30/00 58.6 0.57%
Institutional Class 11/30/00 2.0 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Advisor Equity Growth: (8,9) Growth No
Class A 11/30/00 $ 623.8 0.57%
Class T 11/30/00 9,996.9 0.57%
Class B 11/30/00 2,191.2 0.57%
Class C 11/30/00 810.2 0.57%
Institutional Class 11/30/00 1,665.8 0.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Growth Opportunities:(8,9) Growth No
Class A 11/30/00 $ 562.1 0.35%
Class T 11/30/00 18,976.5 0.35%
Class B 11/30/00 1,886.5 0.35%
Class C 11/30/00 552.1 0.35%
Institutional Class 11/30/00 415.6 0.35%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Large Cap: (8,9) Growth No
Class A 11/30/00 $ 31.3 0.57%
Class T 11/30/00 375.0 0.57%
Class B 11/30/00 158.3 0.57%
Class C 11/30/00 48.5 0.57%
Institutional Class 11/30/00 15.2 0.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Mid Cap: (8,9) Growth No
Class A 11/30/00 $ 80.1 0.57%
Class T 11/30/00 969.3 0.57%
Class B 11/30/00 276.1 0.57%
Class C 11/30/00 110.3 0.57%
Institutional Class 11/30/00 73.3 0.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Small Cap: (8,9) Growth No
Class A 11/30/00 $ 112.0 0.73%
Class T 11/30/00 703.6 0.73%
Class B 11/30/00 316.4 0.73%
Class C 11/30/00 249.2 0.73%
Institutional Class 11/30/00 76.4 0.73%
---------------------------------------------------------------------------------------------------------------------------------
Advisor Strategic Growth: (8,9) Growth No
Class A 11/30/00 $ 5.1 0.57%
Class T 11/30/00 20.2 0.57%
Class B 11/30/00 16.4 0.57%
Class C 11/30/00 2.5 0.57%
Institutional Class 11/30/00 0.8 0.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Advisor Value Strategies: (8,9) Growth No
Class A 11/30/00 $ 11.7 0.36%
Class T 11/30/00 409.1 0.36%
Class B 11/30/00 94.1 0.36%
Class C 11/30/00 19.1 0.36%
Institutional Class 11/30/00 7.7 0.36%
- ---------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth (8,9) Growth 11/30/00 $19,524.1 0.69% No
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Company (8,9) Growth 11/30/00 $31,956.5 0.67% No
- ---------------------------------------------------------------------------------------------------------------------------------
New Millennium (8,9) Growth 11/30/00 $ 3,955.2 0.74% No
- ---------------------------------------------------------------------------------------------------------------------------------
Independence Fund (8,9) Growth 11/30/00 $ 8,513.6 0.70% No
- ---------------------------------------------------------------------------------------------------------------------------------
Contrafund(R)(8,9) Growth 12/30/00 $44,051.5 0.68% No
- ---------------------------------------------------------------------------------------------------------------------------------
Trend (8,9) Growth 12/31/00 $ 1,464.4 0.39% No
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products: (9)
Growth Growth No
Initial Class 12/31/00 $17,727.7 0.57%
Service Class 12/31/00 1,583.3 0.57%
Service Class II(10) 12/31/00 17.0 0.57%(11)
---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products II: No
Contrafund(8,9) Growth
Initial Class 12/31/00 $ 8,967.1 0.57%
Service Class 12/31/00 1,072.6 0.57%
Service Class II(10) 12/31/00 33.9 0.57%(11)
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance
Products III: (8,9)
Growth Opportunities Growth No
Initial Class 12/31/00 $ 1,198.8 0.58%
Service Class 12/31/00 355.2 0.58%
Service Class II(10) 12/31/00 8.4 0.58%(11)
Mid Cap Growth No
Initial Class 12/31/00 197.1 0.58%
Service Class 12/31/00 138.6 0.58%
Service Class II(10) 12/31/00 25.9 0.58%(11)
- ---------------------------------------------------------------------------------------------------------------------------------
Magellan(8,9) Growth 3/31/01 $99,247.3 0.72% No
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Stock(8,9) Growth 4/30/01 $ 966.8 0.69% No
- ---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Stock(8,9) Growth 4/30/01 $ 5,847.3 0.67% No
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Retirement(8,9,10) Growth 4/30/01 $ 2.7 0.00%(11,12) Yes
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Stock(8,9) Growth 4/30/01 $ 1,102.0 0.85% No
- ---------------------------------------------------------------------------------------------------------------------------------
Contrafund II(8,9) Growth 6/30/01 $ 1,476.1 0.71% No
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Fifty(R)(8,9) Growth 6/30/01 $ 447.0 0.63% No
- ---------------------------------------------------------------------------------------------------------------------------------
Blue Chip Growth(8,9) Growth 7/31/01 $26,408.0 0.66% No
- ---------------------------------------------------------------------------------------------------------------------------------
Dividend Growth(8,9) Growth 7/31/01 $12,368.1 0.74% No
- ---------------------------------------------------------------------------------------------------------------------------------
Leveraged Company Stock(8) Growth 7/31/01 $ 158.0 0.63% No
- ---------------------------------------------------------------------------------------------------------------------------------
Low-Priced Stock(8,9) Growth 7/31/01 $ 7,550.9 0.77% No
- ---------------------------------------------------------------------------------------------------------------------------------
Destiny I:(8,9) Growth No
Class O 9/30/01 $ 4,804.3 0.38%
Class N 9/30/01 5.0 0.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Destiny(SM) II:(8,9) Growth No
Class O 9/30/01 $ 5,373.5 0.57%
Class N 9/30/01 29.1 0.57%
---------------------------------------------------------------------------------------------------------------------------------
Funds Subadvised by FMR
- ---------------------------------------------------------------------------------------------------------------------------------
LSA Variable Series Diversified Growth $ 3,285.0 .55%(14) No
Mid-Cap Fund(13)
- ---------------------------------------------------------------------------------------------------------------------------------
Equitable Advisors EQ/FI Mid Cap Growth $178,308.0 .50%(14) No
- ---------------------------------------------------------------------------------------------------------------------------------
Equitable Advisors EQ/FI Small/Mid Growth $445,888.0 .506%(14) No
Cap Value
- ---------------------------------------------------------------------------------------------------------------------------------
Travelers Series Large Cap Growth $249,828.0 .45%(14) No
- ---------------------------------------------------------------------------------------------------------------------------------
GCG Asset Allocation Growth(13) Growth $ 51,185.0 .50%(14) No
- ---------------------------------------------------------------------------------------------------------------------------------
GCG Diversified Mid Cap(13) Growth $ 57,182.0 .50%(14) No
- ---------------------------------------------------------------------------------------------------------------------------------
Manufacturers Investment Strategic Growth $1,065,078.0 .35%(14) No
Opportunities (13)
- ---------------------------------------------------------------------------------------------------------------------------------
Manufacturers Investment Large Cap Growth $496,614.0 .40%(14) No
Growth (13)
- ---------------------------------------------------------------------------------------------------------------------------------
MassMutual Institutional Value Growth $ 68,928.0 .50%(14) No
Equity (13)
- ---------------------------------------------------------------------------------------------------------------------------------
MassMutual Institutional Blue Chip Growth $428,528.0 .529%(14) No
Growth (13)
- ---------------------------------------------------------------------------------------------------------------------------------
Prudential Series SP Large Cap Growth $ 23,677.0 .55%(14) No
Value
- ---------------------------------------------------------------------------------------------------------------------------------
Prudential Series SP Small/Mid Cap Growth $ 47,217.0 .50%(14) No
Value
- ---------------------------------------------------------------------------------------------------------------------------------
Vantagepoint Growth Fund (13) Growth $715,936.0 .61%(14) No
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price
Associates, Inc:
- ---------------------------------------------------------------------------------------------------------------------------------
Funds advised by T. Rowe Price Associates, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Funds, Inc.: Long-term capital $ 4,684.8 .25% (Individual Fee) No
T. Rowe Price Growth Stock appreciation .32% (Group Fee)
Fund, Inc. .67% Total
- ---------------------------------------------------------------------------------------------------------------------------------
Funds subadvised by T. Rowe Price Associates, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Portfolio Partners, Inc. Long-term capital $ 595.4(15) .40% on first $500 million Yes(21)
T. Rowe Price Growth Equity appreciation average daily net assets
Portfolio .375% on assets above $500 million
- ---------------------------------------------------------------------------------------------------------------------------------
Endeavor Series Trust Long-term capital $ 229.9(15) .40% on all assets No
T. Rowe Price Growth Stock appreciation
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
JNL Series Trust Long-term capital $ 474.5(15) .45% on first $20 million Yes
T. Rowe Price/JNL Established appreciation .40% on next $30 million
Growth Series .40% on next $150 million(17,18)
- ---------------------------------------------------------------------------------------------------------------------------------
Metropolitan Series Fund, Inc. Long-term capital $ 173.3(15) .50% on first $50 million No
T. Rowe Price Large Cap Growth appreciation .40% on assets above $50 million
Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
SunAmerica Long-term capital $ 191.2(15) .50% on first $40 million No
Seasons Series Trust Stock appreciation .40% on average daily net assets
Portfolio above $40 million
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price
International, Inc.:
- --------------------------------------------------------------------------------------------------------------------------------
Funds advised by T. Rowe Price International, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Long-term growth $ 6,514.9 .35% (Individual Fee) No
Funds, Inc.: of capital .32% (Group Fee)
T. Rowe Price International .67% Total
Stock Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional International Long-term growth $ 1,842.0 .70 of average daily net assets No
Funds, Inc.: of capital
Foreign Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Long-term growth $ 550.3 1.05% (Covers both investment No
Series, Inc.: of capital management and operating expenses)
T. Rowe Price International
Stock Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Funds subadvised by T. Rowe Price International, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
The Commerce Funds Long-term growth $ 109.4(15) .75% of first $20 million Yes
The International Equity Fund of capital .60% of next $30 million
.50% above $50 million
.50% on all assets once assets
exceed $200 million with a
transitional credit provided
on assets between $184 million
and $200 million(19)
- ---------------------------------------------------------------------------------------------------------------------------------
Endeavor Series Trust Long-term growth $ 127.1(15) .75% of first $20 million Yes
T. Rowe Price International of capital .60% of next $30 million
Stock Portfolio .50% above $50 million(20)
- ---------------------------------------------------------------------------------------------------------------------------------
EQ Advisors Trust Long-term growth $ 201.1(15) .75% of first $20 million Yes
EQ/T. Rowe Price International of capital .60% of next $30 million
Stock Portfolio .50% above $50 million(20)
- ---------------------------------------------------------------------------------------------------------------------------------
Fortis Series Fund, Inc. Long-term growth $ 33.6(15) .75% of first $20 million Yes
International Stock Series II of capital .60% of next $30 million
.50% above $50 million(20)
- ---------------------------------------------------------------------------------------------------------------------------------
John Hancock Variable Series Long-term growth $ 87.9(15) .75% of first $20 million Yes
Trust I International of capital .60% of next $30 million
Opportunities Portfolio .50% above $50 million
Portfolio .50% on all assets once assets
exceed $200 million(19)
- ---------------------------------------------------------------------------------------------------------------------------------
Lutheran Brotherhood Family of Long-term growth $ 99.9(15) .75% of first $20 million Yes
Funds of capital .60% of next $30 million
Lutheran Brotherhood World .50% above $50 million
Growth Fund .50% on all assets once assets
exceed $200 million(19)
- ---------------------------------------------------------------------------------------------------------------------------------
Manufacturers Investment Trust Long-term growth $ 267.6(15) .75% of first $50 million Yes
International Stock Trust of capital .50% of next $150 million
.50% on all assets once assets
exceed $200 million(19)
- ---------------------------------------------------------------------------------------------------------------------------------
The Vantagepoint Funds Long-term growth $ 100.5(15) .75% of first $20 million Yes
International Fund of capital .60% of next $30 million
.50% above $50 million(20)
- ---------------------------------------------------------------------------------------------------------------------------------
What services do the subadvisers provide under the Prior Subadvisory Agreements and Proposed Subadvisory Agreements?
The scope of services provided under the Proposed Subadvisory Agreements will be the same as those under the Prior Subadvisory Agreements. Under the Prior Subadvisory Agreements and the Proposed Subadvisory Agreements, each subadviser is responsible for supervising and directing the investments of its respective Portfolio in accordance with the Portfolio's investment objective, strategies, and restrictions as provided in its prospectus and statement of additional information. Each investment subadviser is also responsible for effecting all securities transactions on behalf of its respective Portfolio, including the negotiation of commissions and the allocation of brokerage.
The Prior Subadvisory Agreements and Proposed Subadvisory Agreements also provide that each investment subadviser, its officers, directors, employees, and certain other persons performing specific functions for each Portfolio will only be liable to the Portfolio for losses resulting from willful misfeasance, bad faith, gross negligence, or reckless disregard of duty.
As described in Proposal 1, AAL will continue to have responsibility for oversight and review of each investment subadviser's performance of its duties.
What brokerage services have been provided to the Portfolios by affiliates of the subadvisers?
Fidelity Management & Research Company ("FMR") may place agency transactions with National Financial Services LLC, an indirect subsidiary of FMR Corp., in connection with the execution of transactions for the FI All Cap Portfolio, if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. FMR may also place agency transactions with REDIBook ECN LLC, an electronic communication network in which a wholly-owned subsidiary of FMR Corp. has an equity ownership interest, if the commissions are fair, reasonable, and comparable to commissions charged by non-affiliated, qualified brokerage firms for similar services. The aggregate amount of commissions paid to these affiliated brokerage firms by the Portfolio for the period November 30, 2001, the Portfolio's inception, until fiscal year ended December 31, 2001 and the percentages these amounts represented of the total commissions paid by the Portfolio over that period are set forth below.
Total brokerage commissions
Total brokerage commissions paid to affiliated brokers as a
paid to affiliated brokers percentage of total commissions
-------------------------- -------------------------------
$3.60 .08%
Information About the Subadvisers
Who is the principal executive officer and who are the directors of each subadviser?
Franklin Advisers, Inc. is a wholly owned subsidiary of Franklin Resources, Inc. Franklin Advisers, Inc. is located at One Franklin Parkway, San Mateo, California 94003. The name and principal occupation of the principal executive officer and each director of Franklin Advisers, Inc. are:
Name Principal Occupation - ---- -------------------- Charles E. Johnson President and Director, Franklin Advisers, Inc. Marty L. Flanagan Executive Vice President and Director, Franklin Advisers, Inc. Rupert H. Johnson, Jr. Director, Franklin Advisers, Inc.
Massachusetts Financial Services Company is an indirect subsidiary of Sun Life Assurance Company of Canada. Massachusetts Financial Services Company is located at 150 King Street West, Toronto, Ontario, Canada. The name and principal occupation of the principal executive officer and each director of Massachusetts Financial Services Company are:
Name Principal Occupation
- ---- --------------------
Jeffrey L. Shames Chairman and Chief Executive Officer, Massachusetts
Financial Services Company
John W. Ballen Director and President, Massachusetts Financial Services
Company
Arnold D. Scott Director and Senior Executive Vice President,
Massachusetts Financial Services Company
Joseph W. Dello Russo Director, Chief Administrative Officer, and Executive Vice
President, Massachusetts Financial Services Company
Robert Whelan Chief Financial Officer and Senior Vice President
Kevin R. Parke Director, Chief Investment Officer and Executive Vice
President, Massachusetts Financial Services Company
Thomas J. Cashman, Jr. Director and Executive Vice President, Massachusetts
Financial Services Company
William W. Scott, Jr. Director and Vice Chairman, Massachusetts Financial
Services Company
C. James Prieur Director, Massachusetts Financial Services Company
Donald A. Stewart Director, Massachusetts Financial Services Company
William W. Stinson Director, Massachusetts Financial Services Company
James C. Baillie Director, Massachusetts Financial Services Company
Martin E. Beaulieu Director, Massachusetts Financial Services Company
Fidelity Management & Research Company is a wholly-owned subsidiary of FMR Corp. Fidelity Management & Research Company is located at 82 Devonshire Street, Boston, Massachusetts 02109. The name and principal occupation of the principal executive officer and each director of Fidelity Management & Research Company are:
Name Principal Occupation
- ---- --------------------
Robert C. Pozen President and Director of Fidelity Management & Research
Company
Edward C. Johnson Chairman of the Board and Director of Fidelity Management
& Research Company ("FMR"); Chief Executive Officer,
Chairman of the Board, and Director of FMR Corp.; Chairman
of the Board and Director of Fidelity Investments Money
Management, Inc. ("FIMM"), and Fidelity Management &
Research (Far East) Inc., and Fidelity Management &
Research Co., Inc. (FMRC); Director of Fidelity Management
& Research (U.K.) Inc.; Chairman of the Executive
Committee of FMR; President and Trustee of funds advised
by FMR
Abigail P. Johnson Director of FMR, FMRC, and FIMM; Senior Vice President of
funds advised by FMR; Director of FMR Corp.; Previously a
Vice President of certain Equity Fidelity funds
Peter S. Lynch Vice Chairman of the Board and Director of FMR and FMRC;
Trustee of funds advised by FMR
T. Rowe Price Associates, Inc. is a wholly owned subsidiary of T. Rowe Price Group, Inc. T.
Rowe Price Associates, Inc. is located at 100 East Pratt Street, Baltimore, Maryland 21202. The name
and principal occupation of the principal executive officer and each director of T. Rowe Price
Associates, Inc. are:
Name Principal Occupation
- ---- --------------------
George A. Roche Chairman of the Board, President and Managing Director, T.
Rowe Price Associates, Inc.
Edward C.Bernard Director and Managing Director, T. Rowe Price Associates,
Inc.
James A.C. Kennedy Director and Managing Director, T. Rowe Price Associates,
Inc.
William T. Reynolds Director and Managing Director, T. Rowe Price Associates,
Inc.
James S. Riepe Director and Managing Director, T. Rowe Price Associates,
Inc.
M. David Testa Director and Managing Director, T. Rowe Price Associates,
Inc.
Martin G. Wade Director and Managing Director, T. Rowe Price Associates,
Inc.
T. Rowe Price International, Inc. is a wholly owned indirect subsidiary of T. Rowe Price. T.
Rowe Price International Inc. is located at 100 East Pratt Street, Baltimore, Maryland 21202. The
name and principal occupation of the principal executive officer and each director of T. Rowe Price
International, Inc. are:
Name Principal Occupation
- ---- --------------------
David J.L. Warren Director, President and Chief Executive Officer, T. Rowe
Price International, Inc.
John R. Ford Director, Chief Investment Officer and Vice President,
T. Rowe Price International, Inc.
James S. Riepe Director, T. Rowe Price International, Inc.
George A. Roche Director, T. Rowe Price International, Inc.
David M. Testa Director, T. Rowe Price International, Inc.
Martin G. Wade Chairman of the Board and Director, T. Rowe Price
International, Inc.
Recommended Shareholder Action
The Board of Directors, including the Independent Directors, unanimously recommend that shareholders vote FOR approval of the Proposed Subadvisory Agreements.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The Board of Directors does not know of any other matters to be considered at the Special Meeting other than those referred to above. If any other matters are properly brought before the Special Meeting, it is the intention of proxy holders to vote such proxies on such matters in accordance with their best judgment.
NO ANNUAL MEETINGS OF SHAREHOLDERS
There will be no annual or further special meetings of shareholders of the Fund unless required by applicable law or called by the Board of Directors in their discretion. Contract owners wishing to submit proposals for inclusion in a proxy statement for a subsequent shareholder meeting should send their written proposals to the Secretary of the Fund, 625 Fourth Avenue South, Minneapolis, Minnesota 55415. Contract owner proposals should be received in a reasonable time before the solicitation is made.
Whether or not you plan to attend this special meeting, please fill in, date and sign the enclosed voting instruction form and return it promptly in the enclosed envelope. No postage is necessary if it is mailed in the United States. Alternatively, you may vote by telephone (1-800-597-7836) or the internet (https://vote.proxy-direct.com) by entering the control number on the enclosed voting instruction card.
March 8, 2002
Date of Proxy Statement
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
By and Between
Aid Association for Lutherans
and
LB Series Fund, Inc.
INVESTMENT ADVISORY AGREEMENT, made as of the ___ day of ________, 200_, (the "Effective Date") by
and between Aid Association for Lutherans, a fraternal benefit society organized and existing under
the laws of the State of Wisconsin ("Adviser"), and LB Series Fund, Inc., a corporation organized and
existing under the laws of the State of Minnesota (the "Fund").
WHEREAS, the Fund is engaged in business as an open-end investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the following Portfolios as separate investment
Portfolios, each having a separate class of shares of capital stock:
o World Growth Portfolio
o Growth Portfolio
o Opportunity Growth Portfolio
o High Yield Portfolio
o Income Portfolio
o Mid Cap Growth Portfolio
o Money Market Portfolio
o FTI Small Cap Growth Portfolio
o MFS Mid Cap Growth Portfolio
o FI All Cap Portfolio
o MFS Investors Growth Portfolio
o TRP Growth Stock Portfolio
o Value Portfolio
o Limited Maturity Bond Portfolio
(the "Initial Portfolios," and together with all other series or Portfolios subsequently established
by the Fund with respect to which Adviser renders investment advisory services pursuant to the terms
of this Agreement, being collectively referred as the "Portfolios" and individually as a
"Portfolio"); and
WHEREAS, Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as
amended ("Advisers Act"); and
WHEREAS, the Fund desires to retain Adviser as adviser to furnish investment advisory services to the
Fund, and Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the parties
hereto agree as follows:
I. Appointment. (A) The Fund hereby appoints Adviser as its investment adviser with respect to
the Portfolios for the period and on the terms set forth in this Agreement, and (B) Adviser
hereby accepts such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of shares other
than the Initial Portfolios with respect to which the Fund desires to retain Adviser to render
investment advisory services hereunder, the Fund shall so notify Adviser in writing,
indicating the advisory fee to be payable with respect to the additional series of shares. If
Adviser is willing to render such services on the terms provided for herein, it shall so
notify the Fund in writing, whereupon such series shall become a Portfolio hereunder.
III. Duties of Adviser.
A. Adviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolios, and (ii) determine from time to
time what investments shall be purchased, sold or exchanged and what portion of the
assets of the Portfolios shall be held uninvested. Adviser shall perform these duties
subject always to (1) the overall supervision of the Board of Directors of the Fund
(the "Board"), (2) the Fund's Articles of Incorporation ("Articles") and by-laws
("By-Laws"), as amended from time to time, (3) the stated investment objectives,
policies and restrictions of the Portfolios as set forth in the Fund's then current
Registration Statement under the 1940 Act and the Securities Act of 1933, as amended,
on Form N-1A, as filed with the Securities and Exchange Commission relating to the
Portfolios and their shares and all amendments thereto ("Registration Statement"), (4)
any additional policies or guidelines established by the Board that have been
furnished in writing to Adviser, (5) applicable provisions of law, including, without
limitation, all applicable provisions of the 1940 Act and the rules and regulations
thereunder, and (6) the provisions of the Internal Revenue Code of 1986, as amended
(the "Code") applicable to "regulated investment companies" (as defined in Section 851
of the Code), as amended from time to time. In accordance with Section VII, Adviser
shall arrange for the execution of all orders for the purchase and sale of securities
and other investments for the Portfolios' accounts and will exercise full discretion
and act for the Fund in the same manner and with the same force and effect as the Fund
might or could do with respect to such purchases, sales, or other transactions, as
well as with respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales, or other transactions, including without limitation,
management of cash balances in the Portfolios.
B. Adviser shall have no responsibility with respect to maintaining custody of the
Portfolios' assets. Adviser shall affirm security transactions with central
depositories and advise the custodian of the Portfolios ("Custodian") or any
subcustodian or depository promptly of each purchase and sale of a Portfolio's
security, specifying the name of the issuer, the description and amount or number of
shares of the security purchased, the market price, the commission and gross or net
price, the trade date and settlement date and the identity of the effecting broker or
dealer. Adviser shall from time to time provide Custodian and the Fund with evidence
of authority of its personnel who are authorized to give instructions to Custodian.
C. Adviser shall exercise proxy and other voting rights incident to any securities held
in the Portfolios without consultation with the Fund, provided that Adviser will
follow any written instructions received from the Fund with respect to voting as to
particular issues. Adviser shall further respond to all corporate action matters
incident to the securities held in the Portfolios including, without limitation,
proofs of claim in bankruptcy and class action cases and shelf registrations.
D. In the performance of its duties hereunder, Adviser is and shall be an independent
contractor and except as expressly provided for herein or otherwise expressly provided
or authorized shall have no authority to act for or represent the Portfolios or the
Fund in any way or otherwise be deemed to be an agent of the Portfolios or the Fund.
IV. Compensation. For the services provided pursuant to this Agreement, Adviser shall receive an
investment management fee as set forth in Schedule 1, attached hereto and incorporated herein
by reference. The management fee shall be payable monthly in arrears to Adviser on or before
the 10th day of the next succeeding calendar month. If this Agreement becomes effective or
terminates before the end of any month, the investment management fee for the period from the
effective date to the end of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the proration which such
period bears to the full month in which such effectiveness or termination occurs.
V. Allocation of Charges and Expenses. Adviser shall furnish at its own expense investment
advisory and portfolio administrative and management services necessary for servicing the
investments of the Portfolios, and investment advisory facilities and executive and
supervisory personnel for managing the investments and effecting the portfolio transactions of
the Fund with respect to the Portfolios. Adviser shall arrange, if desired by the Fund, for
officers and employees of Adviser to serve as Directors, Officers or agents of the Fund if
duly elected or appointed to such positions and subject to their individual consent and to any
limitations imposed by law. It is understood that the Fund will with respect to the
Portfolios pay, or provide for the payment of, all of its own expenses including, without
limitation, compensation of Directors not affiliated with Adviser or Lutheran Brotherhood
Variable Insurance Products Company, governmental fees, interest charges, taxes, membership
dues in the Investment Company Institute allocable to the Fund with respect to the Portfolios,
fees and expenses of independent auditors, of legal counsel and of any transfer agent,
registrar and dividend disbursing agent of the Fund with respect to the Portfolios, expenses
of preparing, printing and mailing prospectuses, shareholders' reports, notices, proxy
statements and reports to governmental officers and commissions, expenses connected with the
execution, recording and settlement of portfolio security transactions, insurance premiums,
fees and expenses of the Custodian for all services to the Fund with respect to the
Portfolios, including safekeeping of funds and securities and keeping of books and calculating
the net asset value of shares of the Portfolios, expenses of shareholders' meetings, and
expenses relating to the issuance, registration and qualification of shares of the Portfolio.
VI. Subadvisers. Adviser may enter into a subinvestment advisory agreement or agreements with one
or more subadvisers providing that such subadviser shall furnish certain advisory and other
services to the Fund and Adviser with respect to the Portfolio and also providing that on the
terms and conditions of such subinvestment advisory agreement such subadviser may determine
from time to time what securities shall be purchased, sold or exchanged by the Fund and what
portion of the assets of the Portfolio shall be held uninvested. Adviser will establish the
overall investment strategy for a subadvised Portfolio and will evaluate, select, and
recommend any such subadviser, subject to the approval of the Board and, unless such approval
by such holders is not required under the rules and regulations promulgated under the 1940 Act
or an exemptive order granted thereunder, the holders of a majority of the outstanding voting
securities of the subadvised Portfolio. Adviser will allocate assets to such subadviser,
monitor the performance, security holdings, and investment strategies of the subadviser and,
when appropriate, research any potential new subadviser for the subadvised Portfolio.
Subject to the overall supervision of the Board, Adviser has responsibility to oversee any
such subadvisers and recommend their hiring, termination and replacement.
VII. Portfolio Transactions.
A. Adviser agrees that, in executing Portfolio transactions and selecting brokers or
dealers, if any, it shall use its best efforts to seek on behalf of the Portfolios the
best overall terms available. In assessing the best overall terms available for any
transaction, Adviser shall consider all factors it deems relevant, including the
breadth of the market in and the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, with respect to the specific transaction and on a continuing
basis. In evaluating the best overall terms available, and in selecting the broker or
dealer, if any, to execute a particular transaction, Adviser may also consider the
brokerage and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act")) provided to Adviser and/or
its affiliates with respect to the Portfolios and/or other accounts over which Adviser
or an affiliate exercises investment discretion. Adviser may, in its discretion,
agree to pay a broker or dealer that furnishes such brokerage or research services a
higher commission than that which might have been charged by another broker-dealer for
effecting the same transactions, if Adviser determines in good faith that such
commission is reasonable in relation to the brokerage and research services provided
by the broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of Adviser and its affiliates with respect to the accounts as
to which they exercise investment discretion (as such term is defined under Section
3(a)(35) of the 1934 Act). Adviser shall, upon request from the Fund, provide such
periodic and special reports describing any such brokerage and research services
received and the incremental commissions, net price or other consideration to which
they relate.
B. In no instance will Portfolio securities be purchased from or sold to Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws and
the rules and regulations thereunder.
C. Adviser may buy securities for a Portfolio at the same time it is selling such
securities for another client account and may sell securities for a Portfolio at the
time it is buying such securities for another client account. In such cases, subject
to applicable legal and regulatory requirements, and in compliance with such
procedures of the Fund as may be in effect from time to time, Adviser may effectuate
cross transactions between a Portfolio and such other account if it deems this to be
advantageous to the Portfolio and such other account.
D. On occasions when Adviser deems the purchase or sale of a security to be in the best
interest of the Fund as well as other clients of Adviser, Adviser, to the extent
permitted by applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to obtain a more
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Adviser in the manner Adviser considers
to be the most equitable and consistent with its fiduciary obligations to the Fund and
to its other clients.
VIII. Records. Adviser shall maintain all books and records required to be maintained by the Fund
pursuant to the 1940 Act and the rules and regulations promulgated thereunder with respect to
transactions on behalf of the Portfolios.
IX. Reports and Meetings.
A. Adviser shall furnish to the Board such information, reports, evaluations, analyses
and opinions as are required by law or that the Board may reasonably require
B. Adviser shall make available in person to the Board and personnel of Adviser as the
Board may reasonably request to review the investments and the investment program of
the Portfolios and the services provided by Adviser hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or restrict (i)
the freedom of Adviser, or any affiliated person thereof, to render investment management and
corporate administrative services to other investment companies, to act as investment manager
or investment counselor to other persons, firms, or corporations, or to engage in any other
business activities, or (ii) the right of any director, officer, or employee of Adviser, who
may also be a director, officer, or employee of the Fund, to engage in any other business or
to devote his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
XI. Adviser's Use of the Services of Others. Adviser 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 Adviser or the Fund or the Portfolios, as appropriate, with such
statistical and other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities, or such other information,
advice, or assistance as Adviser may deem necessary, appropriate, or convenient for the
discharge of its obligations hereunder or otherwise helpful to the Fund or the Portfolios, as
appropriate, or in the discharge of Adviser's overall responsibilities with respect to the
other accounts that it serves as investment manager or counselor.
XII. Limitation of Liability of Adviser. Neither Adviser nor any of its officers, directors, or
employees (collectively, "Related Persons"), shall be liable for (i) any error of judgment or
mistake of law or for any loss suffered by the Fund or Portfolios or (ii) any error of fact or
mistake of law contained in any report or data provided by Adviser, except in each case for
any error, mistake or loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance by Adviser or such Related Person of Adviser's duties on behalf of the Fund
or Portfolios or from reckless disregard by Adviser or any such Related Person of the duties
of Adviser pursuant to this Agreement.
Notwithstanding the foregoing, any stated limitations on liability shall not relieve Adviser
from any responsibility or liability Adviser may have under state or federal statutes or from
responsibility or liability for errors in connection with the execution of trade orders.
XIII. Representations of Adviser. Adviser represents, warrants, and agrees as follows:
A. Adviser (i) is registered as an investment adviser under Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect; (ii) is
not prohibited by the 1940 Act or the Advisers Act from performing the services
contemplated by this Agreement; (iii) has met, and will continue to meet for so long
as this Agreement remains in effect, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will immediately notify the Board of
the occurrence of any event that would disqualify Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act
or otherwise.
B. Adviser has adopted a written code of ethics (the "Adviser Code") complying with the
requirements of Rule 17j-1 under the 1940 Act, as may be amended from time to time,
and, has provided the Fund with a copy of the Adviser Code, together with evidence of
its adoption. Adviser certifies that it has adopted procedures reasonably necessary
to prevent access persons" as defined in Rule 17j-1 ("Access Persons") from violating
the Adviser Code. Adviser will furnish at least annually to the Board a written
report that (a) describes any issues arising under the Adviser Code since the last
report to the Board, including, but not limited to, information about material
violations of the Adviser Code with respect to the Portfolios and sanctions imposed in
response to the material violations and (b) certifies that the Adviser has adopted
procedures reasonably necessary to prevent Access Persons from violating the Adviser
Code.
C. Adviser has provided the Fund with a copy of its Form ADV as most recently filed with
the SEC and, if not so filed, its most recent Part II of Form ADV, and will, promptly
after filing any amendment to its Form ADV with the SEC, and, if not so filed, any
amendment to Part II of its Form ADV, furnish a copy of such amendment to the Fund.
XIV. Compliance with Applicable Regulations. In performing its duties hereunder, Adviser shall
establish compliance procedures reasonably calculated to ensure compliance at all times with
all applicable provisions of the 1940 Act and the Advisers Act, and any rules and regulations
adopted thereunder; Subchapter M of the Code; the provisions of the Registration Statement;
the provisions of the Articles and the By-Laws of the Fund, as the same may be amended from
time to time; and any other applicable provisions of state, federal or foreign law.
XV. Term of Agreement. This Agreement shall become effective with respect to the Initial
Portfolios on the Effective Date and, with respect to any additional Portfolio, on the date of
receipt by the Board of notice from Adviser in accordance with Section II hereof that Adviser
is willing to serve as investment adviser with respect to such Portfolio. Unless sooner
terminated as provided herein, this Agreement shall continue in effect for two years from the
Effective Date with respect to the Initial Portfolios and, with respect to each additional
Portfolio, for two years from the date on which this Agreement becomes effective with respect
to such Portfolio. Thereafter, this Agreement shall continue in effect from year to year,
with respect to the Portfolios, subject to the termination provisions and all other terms and
conditions hereof, so long as (a) such continuation shall be specifically approved at least
annually (i) by either the Board, or by vote of a majority of the outstanding voting
securities of the Portfolios; and (ii) in either event, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of the Directors of
the Fund who are not interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval; and (b) Adviser shall not have
notified the Fund, in writing, at least 60 days prior to such approval that it does not desire
such continuation. Adviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal, or amendment hereof.
XVI. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be terminated at
any time with respect to a Portfolio, without the payment of any penalty, by vote of the Board
or by a vote of a majority of the outstanding voting securities of such Portfolio on at least
60 days' prior written notice to Adviser. This Agreement may also be terminated by the Fund
(i) upon material breach by Adviser of any of the representations and warranties set forth in
Section XIII of this Agreement, if such breach shall not have been cured within a 20-day
period after notice of such breach; or (ii) if Adviser becomes unable to discharge its duties
and obligations under this Agreement. Adviser may terminate this Agreement at any time,
without the payment of any penalty, on at least 60 days' prior notice to the Board. This
Agreement shall terminate automatically in the event of its "assignment", as such term is
defined in the 1940 Act.
Any approval, amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Portfolio shall be effective
to continue, amend or terminate this Agreement with respect to such Portfolio notwithstanding
(i) that such action has not been approved by the holders of a majority of the outstanding
voting securities of any other Portfolios affected thereby, and/or (ii) that such action has
not been approved by the vote of a majority of the outstanding voting securities of the Fund,
unless such action shall be required by any applicable law or otherwise.
XVII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. This Agreement (including any
exhibits and schedules hereto) may be amended at any time by written mutual consent of the
parties, subject to the requirements of the 1940 Act and rules and regulations promulgated and
orders granted thereunder.
XVIII. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws of the
State of Minnesota without giving effect to the conflicts of laws principles thereof
and the 1940 Act. To the extent that the applicable laws of the State of Minnesota
conflict with the applicable provisions of the 1940 Act, the latter shall control.
B. Insurance. Adviser agrees to maintain errors and omissions or professional liability
insurance coverage in an amount that is reasonable in light of the nature and scope of
Adviser's business activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and understanding of
the parties hereto and shall supersede any prior agreements between the parties
relating to the subject matter hereof, and all such prior agreements shall be deemed
terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Articles or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to relieve
or deprive the Board of its responsibility for and control of the conduct of the
affairs of the Portfolios.
F. 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. As used in this Agreement, the terms
"majority of the outstanding voting securities," "affiliated person," "interested
person," "assignment," "broker," "investment adviser," "net assets," "sale," "sell,"
and "security" shall have the same meaning as such terms have in the 1940 Act, subject
to such exemption as may be granted by the SEC by any rule, regulation, or order.
Where the effect of a requirement of the federal securities laws reflected in any
provision of this Agreement is made less restrictive by a rule, regulation, or order
of the SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly
authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_____________________________
SCHEDULE I
- --------------------------------------------------------------------------------
World Growth Portfolio
0.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Opportunity Growth Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
High Yield Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mid Cap Growth Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Money Market Portfolio
0.40%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FTI Small Cap Growth Portfolio
$0-$500 million 1.00%
More than $500 million .90%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio
$0-$500 million .90%
More than $500 million .80%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FI All Cap Portfolio
$0-$500 million .95%
More than $500 million .90%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MFS Investors Growth Portfolio
$0-$500 million .80%
More than $500 million .70%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRP Growth Stock Portfolio
$0-$500 million .80%
More than $500 million .70%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value Portfolio
.60%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
.40%
- --------------------------------------------------------------------------------
EXHIBIT B
INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
Franklin Advisers, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective Date") by
and among Aid Association for Lutherans, a fraternal benefit society organized and existing under the
laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a corporation organized and
existing under the laws of the State of Minnesota ("Fund"), and Franklin Advisers, Inc., a
corporation organized and existing under the laws of the State of California ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day of
January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the FTI Small Cap Portfolio ("Portfolio"), a
separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment supervisory
management services and is registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as subadviser to furnish certain investment
advisory services to Adviser and the Portfolio and Subadviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the parties
hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment subadviser with respect
to the Portfolio for the period and on the terms set forth in this Agreement, and (B)
Subadviser hereby accepts such appointment and agrees to render the services herein set forth,
for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of shares other
than the Portfolio with respect to which Adviser desires to retain Subadviser to render
investment advisory services hereunder, Adviser shall so notify Subadviser in writing,
indicating the advisory fee to be payable with respect to the additional series of shares. If
Subadviser is willing to render such services on the terms provided for herein, it shall so
notify Adviser in writing, whereupon such series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from time to
time what investments shall be purchased, sold or exchanged and what portion of the
assets of the Portfolio shall be held uninvested. As the Fund's agent and
attorney-in-fact, the Subadviser may (a) buy, sell, exchange, convert and otherwise
trade in any stocks, bonds or other securities including money market instruments,
whether the issuer is organized in the United States or outside the United States and
(b) place orders for the execution of such securities transactions with or through
such brokers, dealers or issuers as Subadviser may select. Subadviser shall perform
these duties subject always to (1) the overall supervision of Adviser and the Board of
Directors of the Fund (the "Board"), (2) the Fund's Articles and By-laws (as defined
below), as amended from time to time, (3) the stated investment objectives, policies
and restrictions of the Portfolio as set forth in the Fund's then current Registration
Statement (as defined below), (4) any additional policies or guidelines established by
Adviser or Board that have been furnished in writing to Subadviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of the
1940 Act and the rules and regulations thereunder, and (6) the provisions of the
Internal Revenue Code of 1986, as amended (the "Code") applicable to "regulated
investment companies" (as defined in Section 851 of the Code), as amended from time to
time. In accordance with Section VII, Subadviser shall arrange for the execution of
all orders for the purchase and sale of securities and other investments for the
Portfolio's account and will exercise full discretion and act for the Fund in the same
manner and with the same force and effect as the Fund might or could do with respect
to such purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases, sales,
or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of the
Portfolio's assets. Subadviser shall affirm security transactions with central
depositories and advise the custodian of the Portfolio ("Custodian") or such
depositories or agents as may be designated by Custodian and Adviser promptly of each
purchase and sale of a portfolio security, specifying the name of the issuer, the
description and amount or number of shares of the security purchased, the market
price, the commission and gross or net price, the trade date and settlement date and
the identity of the effecting broker or dealer. Subadviser shall from time to time
provide Custodian and Adviser with evidence of authority of its personnel who are
authorized to give instructions to Custodian. The Fund shall instruct the Custodian
to provide the Subadviser with such information as the Subadviser may reasonably
request relating to daily cash levels held by the Portfolio.
C. Unless Adviser advises Subadviser in writing that the right to vote proxies has been
expressly reserved to Adviser or the Fund or otherwise delegated to another party,
Subadviser shall exercise voting rights incident to any securities held in the
Portfolio without consultation with Adviser or Fund, provided that Subadviser will
follow any written instructions received from Adviser or Fund with respect to voting
as to particular issues. Subadviser shall further respond to all corporate action
matters incident to the securities held in the Portfolio including, without
limitation, proofs of claim in bankruptcy and class action cases and shelf
registrations. Should Subadviser undertake litigation against an issuer on behalf of
accounts which it manages that are shareholders of such issuer, Fund agrees, that in
the event the Portfolio is also a shareholder of such issuer, to pay its proportionate
share of any applicable legal fees associated with the action or to forfeit any claim
to any assets Subadviser may recover and, in such case, agrees to hold Subadviser
harmless for excluding the Portfolio from such action. In the case of class action
suits involving issuers held by the Portfolio, Subadviser may include information
about the Fund for purposes of participating in any settlements.
D. Subadviser shall consult with Adviser to develop strategic marketing plans for the
Fund on or before November 30 in each year for the following calendar year with
respect to the Portfolio and the variable contract for which it provides an underlying
investment choice. Subadviser shall coordinate all marketing support efforts with
Adviser, including, without limitation, the promotion of products, training of
Adviser's field force, seminars promoting the Portfolio and preparation of
presentations for clients (collectively referred to as the activities of
"Wholesalers"). Wholesalers' participation in on-site presentations, sales desk
training, conferences, and portfolio manager conference calls shall first be approved
by Adviser. Subadviser shall not include Adviser's field force in any sales contest
and other incentive promotions sponsored by Subadviser without Adviser's prior written
approval. Subadviser shall also, from time-to-time, provide such additional marketing
support such as Adviser may reasonably request, including, without limitation,
assistance in product roll-outs, on-going product training and sales support, and
development of sales strategies.
E. Upon request of Custodian and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the Portfolio for
which market quotations are not readily available.
F. In the performance of its duties hereunder, Subadviser is and shall be an independent
contractor and except as expressly provided for herein or otherwise expressly provided
or authorized shall have no authority to act for or represent the Portfolio or the
Fund in any way or otherwise be deemed to be an agent of the Portfolio, the Fund or of
Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall receive
an investment management fee as set forth in Schedule 1, attached hereto and incorporated
herein by reference. The management fee shall be payable monthly in arrears to Subadviser on
or before the 10th day of the next succeeding calendar month. If this Agreement becomes
effective or terminates before the end of any month, the investment management fee for the
period from the effective date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the proration
which such period bears to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Subadviser will bear all expenses incurred by it
in the performance of its duties hereunder, other than those expenses specifically assumed by
the Fund hereunder. The Fund shall bear its own expenses, including all brokers' and
underwriting commissions chargeable to the Fund in connection with the securities transactions
to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the following
documents and will furnish to Subadviser at its principal office all future amendments and
supplements to such documents, if any, as soon as practicable after such documents become
available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to time
("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended from
time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of Adviser and
Subadviser and approving the form of the Advisory Agreement and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities Act of
1933, as amended (the "1933 Act") on Form N-1A, as filed with the Securities
and Exchange Commission ("SEC") relating to the Portfolio and its shares and
all amendments thereto ("Registration Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form N-8A as
filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus"); and
(7) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or information
that Subadviser may reasonably request to enable it to perform its duties pursuant to
this Agreement.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting brokers or
dealers, if any, it shall use its best efforts to seek best execution on behalf of the
Portfolio. In assessing the best execution for any transaction, Subadviser shall
consider all factors it deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating best execution and in
selecting the broker or dealer, if any, to execute a particular transaction,
Subadviser may also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended ("1934
Act")) provided to Subadviser with respect to the Portfolio and/or other accounts over
which Subadviser exercises investment discretion. Subadviser may, in its discretion,
agree to pay a broker or dealer that furnishes such brokerage or research services a
higher commission than that which might have been charged by another broker-dealer for
effecting the same transactions, if Subadviser determines in good faith that such
commission is reasonable in relation to the brokerage and research services provided
by the broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of Subadviser with respect to the accounts as to which it
exercises investment discretion (as such term is defined under Section 3(a)(35) of the
1934 Act). Subadviser shall, upon request from Adviser, provide such periodic and
special reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they relate.
B. In no instance will portfolio securities be purchased from or sold to Subadviser, or
any affiliated person thereof, except in accordance with the federal securities laws
and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolio at the same time it is selling such
securities for another client account and may sell securities for the Portfolio at the
time it is buying such securities for another client account. In such cases, subject
to applicable legal and regulatory requirements, and in compliance with such
procedures of the Fund as may be in effect from time to time, Subadviser may
effectuate cross transactions between the Portfolio and such other account if it deems
this to be advantageous.
D. On occasions when Subadviser deems the purchase or sale of a security to be in the
best interest of the Fund as well as other clients of Subadviser, Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be purchased or sold to attempt to obtain a
more favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by Subadviser in the manner Subadviser
considers to be the most equitable and consistent with its fiduciary obligations to
the Fund and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by Subadviser pursuant to the 1940 Act and the rules and regulations promulgated
thereunder with respect to transactions on behalf of the Portfolio. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, Subadviser hereby agrees (A) to preserve for
the periods prescribed by Rule 31a-3 under the 1940 Act any records that it maintains for the
Fund that are required to be maintained by Rule 31a-1 under the 1940 Act and (B) to provide
the Fund with access to or copies of any records that it maintains for the Fund upon
reasonable request by the Fund.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate, such
information, reports, evaluations, analyses and opinions as are required by law or
that the Board or Adviser, as appropriate, may reasonably require, including, without
limitation: compliance reporting and certification with respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Price Overrides/Fair Valuation Determinations
B. Subadviser shall make available in person to the Board and to Adviser personnel of
Subadviser as the Board or Adviser may reasonably request to review the investments
and the investment program of the Portfolio and the services provided by Subadviser
hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or restrict (i)
the freedom of Subadviser, or any affiliated person thereof, to render investment management
and corporate administrative services to other investment companies, to act as investment
manager or investment counselor to other persons, firms, or corporations, or to engage in any
other business activities, or (ii) the right of any director, officer, or employee of
Subadviser, who may also be a director, officer, or employee of the Fund, to engage in any
other business or to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar nature. Nothing in
this Agreement shall impose upon Subadviser any obligation to purchase or sell or to recommend
for purchase or sale, with respect to the Portfolio, any securities which the Subadviser, or
its officers, directors, employees or affiliates may purchase or sell for its or their own
account(s) or for the account of any other client. Subadviser may give advice and take action
with respect to any of its other accounts or for its own account which my differ from the
timing or nature of action taken by the Subadviser with respect to the Portfolio.
XI. Subadviser's Use of the Services of Others. Subadviser 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 Subadviser or the Fund or Portfolio, as appropriate, with such
statistical and other factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities, or such other information,
advice, or assistance as Subadviser may deem necessary, appropriate, or convenient for the
discharge of its obligations hereunder or otherwise helpful to the Fund or the Portfolio, as
appropriate, or in the discharge of Subadviser's overall responsibilities with respect to the
other accounts that it serves as investment manager or counselor.
XII. Use of Franklin Marks. The Subadviser hereby gives the Fund, for the term of this Agreement,
a royalty free, nonexclusive, nontransferable right to use the name "Franklin" or "FTI"
(hereinafter referred to as the "Marks") in the United States as part of the name of the
Portfolio, provided such name is approved by Subadviser in writing. Such right does not
include the right to allow third parties to use the Marks except as specifically provided in
this Agreement. Neither the Fund nor the Adviser shall retain any right to use of the Marks
after the termination of this Agreement. Upon termination of this Agreement, the Fund will
immediately terminate all use of the Marks and destroy any remaining unused sales
documentation, promotional, marketing, advertising or other written printed or electronic
material or performance information that contains the Marks. The Fund agrees to use its best
efforts to ensure that the nature and quality of the services rendered in connection with the
Marks shall conform to the terms of this Agreement and any amendments thereto.
All sales documentation, promotional, marketing, advertising and other written, printed or
electronic material or performance information or data which includes the Marks which is
prepared, controlled and/or issued by or on behalf of the Fund and/or the Adviser and/or their
agents or affiliates shall require the written approval of Subadviser prior to distribution.
XIII. Liability of Subadviser; Indemnification. Neither Subadviser nor any of its officers,
directors, or employees, nor any person performing executive, administrative, trading, or
other functions for the Fund, the Portfolio (at the direction or request of Subadviser) or
Subadviser in connection with Subadviser's discharge of its obligations undertaken or
reasonably assumed with respect to this Agreement (collectively, "Related Persons"), shall be
liable for (i) any error of judgment or mistake of law or for any loss suffered by the Fund or
Portfolio or (ii) any error of fact or mistake of law contained in any report or data provided
by Subadviser, except for any error, mistake or loss resulting from willful misfeasance, bad
faith, or gross negligence in the performance by Subadviser or such Related Person of
Subadviser's duties on behalf of the Fund or Portfolio or from reckless disregard by
Subadviser or any such Related Person of the duties of Subadviser pursuant to this Agreement
(each of which is referred to as a "Culpable Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Subadviser from any responsibility or liability Subadviser may have under state or federal
statutes or from responsibility or liability for errors in connection with the execution of
trade orders.
Subadviser shall indemnify Adviser and its Related Persons and hold them harmless from and
against any and all actions, suits or claims whether groundless or meritorious and from and
against any and all losses, damages, costs, charges, reasonable counsel fees, payments,
expenses and liabilities (collectively, "Damages") arising directly or indirectly out of or in
connection with the performance of services by Subadviser or its Related Persons hereunder to
the extent such Damages result from willful misfeasance, bad faith, gross negligence or the
reckless disregard of Subadviser's obligations and duties under this Agreement.
Adviser shall indemnify Subadviser and its Related Persons and hold them harmless from and
against any Damages arising directly or indirectly out of or in connection with the
performance of services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any Culpable Act of Adviser or
any of its Related Persons.
XIV. Representations of Subadviser. Subadviser represents, warrants, and agrees as follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect; (ii) is
not prohibited by the 1940 Act or the Advisers Act from performing the services
contemplated by this Agreement; (iii) has met, and will continue to meet for so long
as this Agreement remains in effect, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or industry
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority to enter into and perform the
services contemplated by this Agreement; and (v) will immediately notify Adviser of
the occurrence of any event that would disqualify Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act
or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code") complying with
the requirements of Rule 17j-1 under the 1940 Act, as may be amended from time to
time, and, has provided the Adviser and the Fund with a copy of the Subadviser Code,
together with evidence of its adoption. The Subadviser certifies that it has adopted
procedures reasonably necessary to prevent access persons as defined in Rule 17j-1
("Access Persons") from violating the Subadviser Code. On a periodic basis, Subadviser
will either; (i) certify to Adviser that Subadviser and its Access Persons have
complied with Subadviser Code with respect to the Portfolio, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to the
Portfolio. In addition, Subadviser will furnish at least annually to Adviser and the
Board a written report that (a) describes any issues arising under the Subadviser Code
since the last report to the Board, including, but not limited to, information about
material violations of the Subadviser Code with respect to the Portfolio and sanctions
imposed in response to the material violations and (b) certifies that the Subadviser
has adopted procedures reasonably necessary to prevent Access Persons from violating
the Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as most
recently filed with the SEC and, if not so filed, its most recent Part II of Form ADV,
and will, promptly after filing any amendment to its Form ADV with the SEC, and, if
not so filed, any amendment to Part II of its Form ADV, furnish a copy of such
amendment to Adviser.
XV. Compliance with Applicable Regulations. In performing its duties hereunder, Subadviser shall
establish compliance procedures (copies of which shall be provided to Adviser, and shall be
subject to review and approval by Adviser) reasonably calculated to ensure compliance at all
times with all applicable provisions of the 1940 Act and the Advisers Act, and any rules and
regulations adopted thereunder; Subchapter M of the Code; the provisions of the Registration
Statement; the provisions of the Articles and the By-Laws of the Fund, as the same may be
amended from time to time; and any other applicable provisions of state, federal or foreign
law.
XVI. Term of Agreement. This Agreement shall become effective with respect to the FTI Small Cap
Portfolio on the Effective Date and, with respect to any additional Portfolio, on the date of
receipt by the Adviser of notice from the Subadviser in accordance with Section II hereof that
the Subscriber is willing to serve as Subadviser with respect to such Portfolio. Unless
sooner terminated as provided herein, this Agreement shall continue in effect for two years
from the Effective Date with respect to the FTI Small Cap Portfolio and, with respect to each
additional Portfolio, for two years from the date on which this Agreement becomes effective
with respect to such Portfolio. Thereafter, this Agreement shall continue in effect from year
to year, with respect to the Portfolio, subject to the termination provisions and all other
terms and conditions hereof, so long as (a) such continuation shall be specifically approved
at least annually (i) by either the Board, or by vote of a majority of the outstanding voting
securities of the Portfolio; (ii) in either event, by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the Directors of the Fund
who are not interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval; and (b) Subadviser shall not have notified
the Fund, in writing, at least 60 days prior to such approval that it does not desire such
continuation. Subadviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal, or amendment hereof.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Board or by a vote of a majority
of the outstanding voting securities of the Portfolio on at least 60 days' prior written
notice to Subadviser. This Agreement may also be terminated by Adviser: (i) on at least 60
days' prior written notice to Subadviser, without the payment of any penalty; (ii) upon
material breach by Subadviser of any of the representations and warranties set forth in
Section XIV of this Agreement, if such breach shall not have been cured within a 20-day period
after notice of such breach; or (iii) if Subadviser becomes unable to discharge its duties and
obligations under this Agreement. Subadviser may terminate this Agreement at any time,
without the payment of any penalty, on at least 60 days' prior notice to Adviser. This
Agreement shall terminate automatically in the event of its assignment, as such term is
defined in the 1940 Act, or upon termination of the Advisory Agreement. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of any Portfolio shall be effective to
continue, amend or terminate this Agreement with respect to any such Portfolio notwithstanding
(i) that such action has not been approved by the holders of a majority of the outstanding
voting securities of any other Portfolio affected thereby, and/or (ii) that such action has
not been approved by the vote of a majority of the outstanding voting securities of the Fund,
unless such action shall be required by any applicable law or otherwise.
XVIII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. This Agreement (including any
exhibits hereto) may be amended at any time by written mutual consent of the parties, subject
to the requirements of the 1940 Act and rules and regulations promulgated and orders granted
thereunder.
XIX. Notification. Subadviser will notify Adviser promptly of any change in the personnel of
Subadviser with responsibility for making investment decisions in relation to the Portfolio or
who have been authorized to give instructions to Custodian.
XX. Override Provisions. Notwithstanding any other provision of this Agreement:
A. Prior to this Agreement being approved by a vote of a majority of the Portfolio's outstanding
voting securities in accordance with the 1940 Act: (i) in no event shall compensation paid
to the Subadviser hereunder exceed the amount permitted by Rule 15a-4 under the 1940 Act;
(ii) the portion of the compensation payable by the Fund to the Adviser under the terms of
the Advisory Agreement with respect to such Portfolio that is equal in amount to the
compensation payable to the Subadviser hereunder (the "Subadviser Escrow Amount") shall be
held in an interest-bearing escrow account with the Fund's custodian or a bank (the
"Escrow Account"); and (iii) this Agreement may be terminated at any time without the
payment of any penalty, by vote of the Board or by a vote of a majority of the outstanding
voting securities of the Portfolio on 10 days' prior written notice to the Subadviser.
The Subadviser Escrow Amount, including interest earned thereon, shall be paid promptly
after approval of this Agreement by the vote of a majority of the Portfolio's outstanding
voting securities in accordance with the 1940 Act, provided that such approval is obtained
no later than 150 days after the date of this Agreement.
B. If this Agreement is not approved by a vote of a majority of the Portfolio's outstanding
voting securities within the time period stated above, (i) this Agreement shall
immediately terminate; and (ii) the Subadviser shall receive from the Escrow Account the
lesser of: (a) the sum of the amount of any costs incurred by the Subadviser in performing
its duties under this Agreement prior to such termination plus any interest earned on that
amount, and (b) the sum of the Subadviser Escrow Amount plus any interest earned on that
amount.
XXI. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws of the
State of California without giving effect to the conflicts of laws principles thereof
and the 1940 Act. To the extent that the applicable laws of the State of California
conflict with the applicable provisions of the 1940 Act, the latter shall control.
B. Insurance. Subadviser agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the nature
and scope of Subadviser's business activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and understanding of
the parties hereto and shall supersede any prior agreements between the parties
relating to the subject matter hereof, and all such prior agreements shall be deemed
terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Articles or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to relieve
or deprive the Board of its responsibility for and control of the conduct of the
affairs of the Portfolio.
F. 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. As used in this Agreement, the terms
"majority of the outstanding voting securities," "affiliated person," "interested
person," "assignment," broker," "investment adviser," "net assets," "sale," "sell,"
and "security" shall have the same meaning as such terms have in the 1940 Act, subject
to such exemption as may be granted by the SEC by any rule, regulation, or order.
Where the effect of a requirement of the federal securities laws reflected in any
provision of this Agreement is made less restrictive by a rule, regulation, or order
of the SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly
authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
FRANKLIN ADVISERS, INC.
Attest:_____________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:_____________________________
Schedule I
Dated as of January 1, 2002
Subadvisory Fees
FTI Small Cap Portfolio
Average Net Daily Assets Annual Rate
$0 - 200 million 0.60%
$200 - 500 million 0.52%
Above $500 million 0.50%
EXHIBIT C
INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
Massachusetts Financial Services Company
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective
Date") by and among Aid Association for Lutherans, a fraternal benefit society organized and
existing under the laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a
corporation organized and existing under the laws of the State of Minnesota ("Fund"), and
Massachusetts Financial Services Company, a corporation organized and existing under the
laws of the State of Delaware ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day
of January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an
open-end investment company registered under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the MFS Mid Cap Growth Portfolio and the
MFS Investors Growth Portfolio (each a "Portfolio", and collectively, the "Portfolios"), as
separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment
supervisory management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as Subadviser to furnish certain
investment advisory services to Adviser and the Portfolios and Subadviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the
parties hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment Subadviser
with respect to the Portfolios for the period and on the terms set forth in this
Agreement, and (B) Subadviser hereby accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of
shares other than the Portfolios with respect to which Adviser desires to retain
Subadviser to render investment advisory services hereunder, Adviser shall so notify
Subadviser in writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If Subadviser is willing to render such services on the
terms provided for herein, it shall so notify Adviser in writing, whereupon such
series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolios, and (ii) determine from
time to time what investments shall be purchased, sold or exchanged and what
portion of the assets of the Portfolios shall be held uninvested. Subadviser
shall perform these duties subject always to (1) the overall supervision of
Adviser and the Board of Directors of the Fund (the "Board"), (2) the Fund's
Articles and By-laws (as defined below), as amended from time to time, (3) the
stated investment objectives, policies and restrictions of the Portfolios as
set forth in the Fund's then current Registration Statement (as defined
below), (4) any additional policies or guidelines established by Adviser or
Board that have been furnished in writing to Subadviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of
the 1940 Act and the rules and regulations thereunder, and (6) the provisions
of the Internal Revenue Code of 1986, as amended (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the Code), as
amended from time to time. In accordance with Section VII, Subadviser shall
arrange for the execution of all orders for the purchase and sale of
securities and other investments for the Portfolios' accounts and will
exercise full discretion and act for the Fund in the same manner and with the
same force and effect as the Fund might or could do with respect to such
purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such
purchases, sales, or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of
the Portfolios assets. Subadviser shall affirm security transactions with
central depositories and advise the custodian of the Portfolios ("Custodian")
or such depositories or agents as may be designated by Custodian and Adviser
promptly of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, the commission and gross or net price,
the trade date and settlement date and the identity of the effecting broker or
dealer. Subadviser shall from time to time provide Custodian and Adviser with
evidence of authority of its personnel who are authorized to give instructions
to Custodian.
C. Unless Adviser advises Subadviser in writing that the right to vote proxies
has been expressly reserved to Adviser or the Fund or otherwise delegated to
another party, Subadviser shall exercise voting rights incident to any
securities held in the Portfolios without consultation with Adviser or Fund,
provided that Subadviser will follow any written instructions received from
Adviser or Fund with respect to voting as to particular issues. Subadviser
shall further respond to all corporate action matters incident to the
securities held in the Portfolios including, without limitation, proofs of
claim in bankruptcy and class action cases and shelf registrations.
D. Subadviser shall consult with Adviser to develop strategic marketing plans for
the Fund on or before November 30 in each year for the following calendar year
with respect to the Portfolios and the variable contract for which it provides
an underlying investment choice. Subadviser shall coordinate all marketing
support efforts with Adviser, including, without limitation, the promotion of
products, training of Adviser's field force, seminars promoting the Portfolios
and preparation of presentations for clients (collectively referred to as the
activities of "Wholesalers"). Wholesalers' participation in on-site
presentations, sales desk training, conferences, and portfolio manager
conference calls shall first be approved by Adviser. Subadviser shall not
include Adviser's field force in any sales contest and other incentive
promotions sponsored by Subadviser without Adviser's prior written approval.
Subadviser shall also, from time-to-time, provide such additional marketing
support such as Adviser may reasonably request, including, without limitation,
assistance in product roll-outs, on-going product training and sales support,
and development of sales strategies.
E. Upon request of Custodian and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the
Portfolios for which market quotations are not readily available.
F. In the performance of its duties hereunder, Subadviser is and shall be an
independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for
or represent the Portfolios or the Fund in any way or otherwise be deemed to
be an agent of the Portfolios, the Fund or of Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall
receive an investment management fee as set forth in Schedule 1, attached hereto and
incorporated herein by reference. The management fee shall be payable monthly in
arrears to Subadviser on or before the 10th day of the next succeeding calendar
month. If this Agreement becomes effective or terminates before the end of any
month, the investment management fee for the period from the effective date to the
end of such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proration which such period bears
to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Subadviser will bear all expenses
incurred by it in the performance of its duties hereunder, other than those expenses
specifically assumed by the Fund hereunder. The Fund shall assume and shall pay all
brokers' and underwriting commissions chargeable to the Fund in connection with the
securities transactions to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the
following documents and will furnish to Subadviser at its principal office all future
amendments and supplements to such documents, if any, as soon as practicable after
such documents become available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to
time ("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended
from time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of
Adviser and Subadviser and approving the form of the Advisory Agreement
and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended (the "1933 Act") on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form
N-8A as filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus");
(7) A list of affiliated brokers and underwriters for reporting
transactions under applicable provisions of the 1940 Act; and
(8) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or
information that Subadviser may reasonably request to enable it to perform its
duties pursuant to this Agreement. Subadviser's obligations with respect to
compliance with any document or information contained in this Article VI shall
not be deemed effective until three (3) business days after Subadviser's
receipt thereof.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting
brokers or dealers, if any, it shall use its best efforts to seek on behalf of
the Portfolios the best overall terms available. In assessing the best
overall terms available for any transaction, Subadviser shall consider all
factors it deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, with
respect to the specific transaction and on a continuing basis. In evaluating
the best overall terms available, and in selecting the broker or dealer, if
any, to execute a particular transaction, Subadviser may also consider the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934, as amended ("1934 Act")) provided to
Subadviser with respect to the Portfolios and/or other accounts over which
Subadviser exercises investment discretion. Subadviser may, in its
discretion, agree to pay a broker or dealer that furnishes such brokerage or
research services a higher commission than that which might have been charged
by another broker-dealer for effecting the same transactions, if Subadviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
Subadviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act).
Subadviser shall, upon request from Adviser, provide such periodic and special
reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they
relate.
B. In no instance will portfolio securities be purchased from or sold to
Subadviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolios at the same time it is
selling such securities for another client account and may sell securities for
the Portfolios at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory
requirements, and in compliance with such procedures of the Fund as may be in
effect from time to time, Subadviser may effectuate cross transactions between
a Portfolio and such other account if it deems this to be advantageous.
D. On occasions when Subadviser deems the purchase or sale of a security to be in
the best interest of a Portfolio as well as other clients of Subadviser,
Subadviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be purchased
or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Subadviser in the manner Subadviser considers to
be the most equitable and consistent with its fiduciary obligations to the
Portfolio and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by Subadviser pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Portfolios. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Subadviser hereby
agrees (A) that all records that it maintains for the Portfolios are the property of
the Fund, (B) to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be maintained by
Rule 31a-1 under the 1940 Act, and (C) to surrender promptly to the Fund any records
that it maintains for the Fund upon request by the Fund; provided, however,
Subadviser may retain copies of such records.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate,
such information, reports, evaluations, analyses and opinions as are required
by law or that the Board or Adviser, as appropriate, and Subadviser may
mutually agree upon, including, without limitation: certain compliance
reporting and certification with respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Price Overrides/Fair Valuation Determinations
B. Subadviser shall make available in person to the Board and to Adviser
personnel of Subadviser as the Board or Adviser may reasonably request to
review the investments and the investment program of the Portfolios and the
services provided by Subadviser hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or
restrict (i) the freedom of Subadviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other persons,
firms, or corporations, or to engage in any other business activities, or (ii) the
right of any director, officer, or employee of Subadviser, who may also be a
director, officer, or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
XI. Subadviser's Use of the Services of Others. Subadviser 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 Subadviser or the Portfolios, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as Subadviser
may deem necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Portfolios, or in the discharge of Subadviser's
overall responsibilities with respect to the other accounts that it serves as
investment manager or counselor.
XII. Liability and Indemnification
A. Except as may otherwise be provided by the Investment Company Act or any other
federal securities law, neither the Subadviser nor any of its officers, members
or employees (its "Affiliates") shall be liable for any losses, claims,
damages, liabilities or litigation (including legal and other expenses)
incurred or suffered by the Adviser or the Fund as a result of any error of
judgment or mistake of law by the Subadviser or its Affiliates with respect to
a Portfolio, except that nothing in this Agreement shall operate or purport to
operate in any way to exculpate, waive or limit the liability of the Subadviser
or its Affiliates for, and the Subadviser shall indemnify and hold harmless the
Portfolio, the Adviser, all affiliated persons thereof (within the meaning of
Section 2(a)(3) of the Investment Company Act) and all controlling persons (as
described in Section 15 of the 1933 Act) (collectively "Adviser Indemnitees")
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which any of the Adviser
Indemnitees may become subject under the 1933 Act, the Investment Company Act,
the Advisers Act, or under any other statute, at common law or otherwise
arising out of or based on any willful misconduct, bad faith, reckless
disregard or gross negligence of the Subadviser in the performance of any of
its duties or obligations hereunder.
B. Except as may otherwise be provided by the Investment Company Act or any other
federal securities law, neither the Adviser, the Fund nor any of their
respective Affiliates shall be liable for any losses, claims, damages,
liabilities or litigation (including legal and other expenses) incurred or
suffered by the Subadviser as a result of any error of judgment or mistake of
law by the Adviser or its Affiliates with respect to the Portfolios, except
that nothing in this Agreement shall operate or purport to operate in any way
to exculpate, waive or limit the liability of the Adviser or its Affiliates
for, and the Adviser shall indemnify and hold harmless the Subadviser, all
affiliated persons thereof (within the meaning of Section 2(a)(3) of the
Investment Company Act) and all controlling persons (as described in Section
15 of the 1933 Act) (collectively "Subadviser Indemnitees") against any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) to which any of the Subadviser Indemnitees may
become subject under the 1933 Act, the Investment Company Act, the Advisers
Act, or under any other statute, at common law or otherwise arising out of or
based on any willful misconduct, bad faith, reckless disregard or gross
negligence of the Adviser in the performance of any of its duties or
obligations hereunder.
C. Promptly after receipt by an indemnified party under this Section XII of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section XII, notify the indemnifying party of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve it from
liability which it may have to any indemnified party otherwise than under this
Section XII. In case any such action is brought against any indemnified party
and it notified the indemnifying party of the commencement thereof, the
indemnifying part will be entitled to participate therein and, to the extend
that it may wish and unless the indemnified party releases the indemnifying
party from any further obligations under this Section XII in connection with
that action, assume the defense thereof, with counsel satisfactory to such
indemnified party. After notice from the indemnifying part of its intention
to assume the defense of any action, the indemnified party shall bear the
expenses of any additional counsel obtained by it, and the indemnifying part
shall not be liable to such indemnified party under this Section XII for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
XIII. Representations of Subadviser. Subadviser represents, warrants, and agrees as
follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency, necessary to be met in
order to perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any
event that would disqualify Subadviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code")
complying with the requirements of Rule 17j-1 under the 1940 Act, as may be
amended from time to time, and, has provided the Adviser and the Fund with a
copy of the Subadviser Code, together with evidence of its adoption. The
Subadviser certifies that it has adopted procedures reasonably necessary to
prevent access persons as defined in Rule 17j-1 ("Access Persons") from
violating the Subadviser Code. On a quarterly basis, Subadviser will either;
(i) certify to Adviser that Subadviser and its Access Persons have complied
with Subadviser Code with respect to the Portfolios, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to
the Portfolios. In addition, Subadviser will furnish at least annually to
Adviser and the Board a written report that (a) describes any issues arising
under the Subadviser Code since the last report to the Board, including, but
not limited to, information about material violations of the Subadviser Code
with respect to the Portfolios and sanctions imposed in response to the
material violations and (b) certifies that the Subadviser has adopted
procedures reasonably necessary to prevent Access Persons from violating the
Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as most
recently filed with the SEC and, if not so filed, its most recent Part 2 of
Form ADV, and will, promptly after filing any amendment to its Form ADV with
the SEC, and, if not so filed, any amendment to Part 2 of its Form ADV,
furnish a copy of such amendment to Adviser.
XIV. Representations of Adviser. Adviser represents, warrants, and agrees as follows:
A. Adviser (i) is registered as an investment adviser under Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect;
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by its management agreement with the Fund; (iii) has
met, and will continue to meet for so long as this Agreement remains in
effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary
to be met in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services contemplated by
this Agreement; and (v) will promptly notify Adviser of the occurrence of any
event that would disqualify Subadviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Adviser and the Fund have adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act, as may be amended from time to
time.
C. Adviser has provided Subadviser with a copy of its Form ADV as most recently
filed with the SEC and, if not so filed, the most recent Part 2 of Form ADV,
and will, promptly after filing any amendment to its Form ADV with the SEC, and,
if not so filed, any amendment to Part 2 of its Form ADV, furnish a copy of
such amendment to Subadviser.
XV. Compliance with Applicable Regulations. In performing its duties hereunder,
Subadviser shall perform such compliance testing as it deems reasonable based upon
its own books and records with respect to the Portfolios and shall certify compliance
to the Adviser accordingly.
XVI. Term of Agreement. This Agreement shall become effective with respect to the MFS Mid
Cap Growth Portfolio and the MFS Investors Growth Portfolio on the Effective Date
and, with respect to any additional Portfolio, on the date of receipt by the Adviser
of notice from the Subadviser in accordance with Section II hereof that the
Subscriber is willing to serve as Subadviser with respect to such Portfolio. Unless
sooner terminated as provided herein, this Agreement shall continue in effect for two
years from the Effective Date with respect to the MFS Mid Cap Growth Portfolio and
the MFS Investors Growth Portfolio and, with respect to each additional Portfolio,
for two years from the date on which this Agreement becomes effective with respect to
such Portfolio. Thereafter, this Agreement shall continue in effect from year to
year, with respect to the Portfolios, subject to the termination provisions and all
other terms and conditions hereof, so long as (a) such continuation shall be
specifically approved at least annually (i) by either the Board, or by vote of a
majority of the outstanding voting securities of the Portfolio; (ii) in either event,
by the vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval; and (b) Subadviser shall not have notified the Fund, in
writing, at least 60 days prior to such approval that it does not desire such
continuation. Subadviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or
any extension, renewal, or amendment hereof.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the Board or
by a vote of a majority of the outstanding voting securities of the Portfolio on at
least 60 days' prior written notice to Subadviser. This Agreement may also be
terminated by Adviser: (i) on at least 60 days' prior written notice to Subadviser,
without the payment of any penalty; (ii) upon material breach by Subadviser of any of
the representations and warranties set forth in Section XIII of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of such
breach; or (iii) if Subadviser becomes unable to discharge its duties and obligations
under this Agreement. Subadviser may terminate this Agreement at any time, without
the payment of any penalty, on at least 60 days' prior notice to Adviser. This
Agreement shall terminate automatically in the event of its assignment, as such term
is defined in the 1940 Act, or upon termination of the Advisory Agreement. Any
approval, amendment, or termination of this Agreement by the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of any Portfolio shall
be effective to continue, amend or terminate this Agreement with respect to any such
Portfolio notwithstanding (i) that such action has not been approved by the holders
of a majority of the outstanding voting securities of any other Portfolio affected
thereby, and/or (ii) that such action has not been approved by the vote of a majority
of the outstanding voting securities of the Fund, unless such action shall be
required by any applicable law or otherwise.
XVIII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. This
Agreement (including any exhibits hereto) may be amended at any time by written
mutual consent of the parties, subject to the requirements of the 1940 Act and rules
and regulations promulgated and orders granted thereunder.
XIX. Notification. Subadviser will notify Adviser promptly of any change in the personnel
of Subadviser with responsibility for making investment decisions in relation to the
Portfolios or who have been authorized to give instructions to Custodian.
XX. Override Provisions. Notwithstanding any other provision of this Agreement:
A. Prior to this Agreement being approved by a vote of a majority of the respective
Portfolio's outstanding voting securities in accordance with the 1940 Act: (i) in
no event shall compensation paid to the Subadviser hereunder with respect to such
Portfolio exceed the amount permitted by Rule 15a-4 under the 1940 Act; (ii) the
portion of the compensation payable by the Fund to the Adviser under the terms of
the Advisory Agreement with respect to such Portfolio that is equal in amount to
the compensation payable to the Subadviser hereunder (the "Subadviser Escrow
Amount") shall be held in an interest-bearing escrow account with the Fund's
custodian or a bank (the "Escrow Account"); and (iii) this Agreement may be
terminated at any time without the payment of any penalty, by vote of the Board
or by a vote of a majority of the outstanding voting securities of the Portfolio
on 10 days' prior written notice to the Subadviser. The Subadviser Escrow
Amount, including interest earned thereon, shall be paid promptly after approval
of this Agreement by the vote of a majority of the Portfolio's outstanding voting
securities in accordance with the 1940 Act, provided that such approval is
obtained no later than 150 days after the date of this Agreement.
B. If this Agreement is not approved by a vote of a majority of the respective
Portfolio's outstanding voting securities within the time period stated above,
(i) this Agreement shall immediately terminate with respect to such Portfolio;
and (ii) the Subadviser shall receive from the Escrow Account the lesser of: (a)
the sum of the amount of any costs incurred by the Subadviser in performing its
duties under this Agreement prior to such termination plus any interest earned on
that amount, and (b) the sum of the Subadviser Escrow Amount plus any interest
earned on that amount.
XXI. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts without giving effect to the conflicts of
laws principles thereof and the 1940 Act. To the extent that the applicable
laws of the Commonwealth of Massachusetts conflict with the applicable
provisions of the 1940 Act, the latter shall control.
B. Insurance. Subadviser agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of Subadviser's business activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties relating to the subject matter hereof, and all such prior
agreements shall be deemed terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Articles or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of its responsibility for and
control of the conduct of the affairs of the Portfolios.
F. 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. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," broker," "investment adviser," "net assets," "sale," "sell," and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule,
regulation, or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is made less
restrictive by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
G. Use of Name. Adviser shall not use the names "Massachusetts Financial Services
Company," "MFS Investment Management," "MFS", or any derivative or logo or
trade or service mark thereof, or disclose information related to the business
of Subadviser or any of its affiliates, in any prospectus, sales literature or
other material relating to the Portfolios in any manner not approved prior
thereto in writing by Subadviser; provided, however, that Subadviser shall
approve all uses of its name and that of its affiliates which merely refer in
accurate terms to its appointment hereunder or which are required by the SEC.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
Schedule I
Dated as of January 1, 2002
Subadvisory Fees
MFS Mid Cap Growth Portfolio
Average Daily Assets Annual Rate
$0 - 100 million 0.475%
$100 to 500 million 0.42%
Above $500 million 0.35%
MFS Investors Growth Portfolio
Average Daily Assets Annual Rate
$0 - 100 million 0.425%
$100 to 500 million 0.40%
Above $500 million 0.35%
EXHIBIT D
INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
Fidelity Management & Research Company
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective
Date") by and among Aid Association for Lutherans, a fraternal benefit society organized and
existing under the laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a
corporation organized and existing under the laws of the State of Minnesota ("Fund"), and
Fidelity Management & Research Company, a corporation organized and existing under the laws
of the State of Delaware ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day
of January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an
open-end investment company registered under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the FI All Cap Portfolio ("Portfolio"), a
separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment
supervisory management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as subadviser to furnish certain
investment advisory services to Adviser and the Portfolio and Subadviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the
parties hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment subadviser
with respect to the Portfolio for the period and on the terms set forth in this
Agreement, and (B) Subadviser hereby accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of
shares other than the Portfolio with respect to which Adviser desires to retain
Subadviser to render investment advisory services hereunder, Adviser shall so notify
Subadviser in writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If Subadviser is willing to render such services on the
terms provided for herein, it shall so notify Adviser in writing, whereupon such
series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from
time to time what investments shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held uninvested. Subadviser
shall perform these duties subject always to (1) the overall supervision of
Adviser and the Board of Directors of the Fund (the "Board"), (2) the Fund's
Articles and By-laws (as defined below), as amended from time to time, (3) the
stated investment objectives, policies and restrictions of the Portfolio as
set forth in the Fund's then current Registration Statement (as defined
below), (4) any additional policies or guidelines established by Adviser or
Board that have been furnished in writing to Subadviser, and (5) all
applicable provisions of the 1940 Act, the Advisers Act, and the rules and
regulations thereunder. In advising the Portfolio, the Subadviser shall use
reasonable efforts to comply with Subchapters L and M of the Internal Revenue
Code of 1986, as amended (the "Code") . In accordance with Section VII,
Subadviser shall arrange for the execution of all orders for the purchase and
sale of securities and other investments for the Portfolio's account and will
exercise full discretion and act for the Fund in the same manner and with the
same force and effect as the Fund might or could do with respect to such
purchases, sales, or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such
purchases, sales, or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of
the Portfolios assets. Subadviser shall affirm security transactions with
central depositories and advise the custodian of the Portfolio ("Custodian")
or such depositories or agents as may be designated by Custodian and Adviser
promptly of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, the commission and gross or net price,
the trade date and settlement date and the identity of the effecting broker or
dealer. Subadviser shall from time to time provide Custodian and Adviser with
evidence of authority of its personnel who are authorized to give instructions
to Custodian.
C. Adviser acknowledges that Subadviser is not the compliance agent for the Fund
or for Adviser, and does not have access to all of the Fund's books and
records necessary to perform certain compliance testing. To the extent that
Subadviser has agreed to perform the services specified in this Section hereof
in accordance with applicable law (including sub-chapters M and L of the Code,
the 1940 Act and the Advisers Act ("Applicable Law")) and in accordance with
the Fund's Articles of Incorporation and By-laws, policies and determinations
of the Board and Adviser and the Fund's current Registration Statement
received by Subadviser (collectively, the "Charter Requirements"), the
Subadviser shall perform such services based upon its books and records with
respect to the Portfolio, which comprise a portion of the Portfolio's books
and records, and upon written instructions received from the Fund, Adviser or
the Fund's administrator, and shall not be held responsible under this
Agreement so long as it performs such services in accordance with this
Agreement, the Charter Requirements and Applicable Law based upon such books
and records and such instructions provided by the Fund, Adviser or the Fund's
administrator.
D. Unless Adviser advises Subadviser in writing that the right to vote proxies
has been expressly reserved to Adviser or the Fund or otherwise delegated to
another party, Subadviser shall exercise voting rights incident to any
securities held in the Portfolio without consultation with Adviser or Fund,
provided that Subadviser will follow any written instructions received from
Adviser or Fund with respect to voting as to particular issues thirty days
prior to the vote. Subadviser shall further respond to all corporate action
matters incident to the securities held in the Portfolio including, without
limitation, proofs of claim in bankruptcy and class action cases and shelf
registrations.
E. Upon request of Custodian and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the
Portfolio for which market quotations are not readily available and the
parties to this Agreement agree that the Subadviser shall not bear
responsibility or liability for the determination or accuracy of the valuation
of any portfolio securities and other assets of the Portfolio.
F. In the performance of its duties hereunder, Subadviser is and shall be an
independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for
or represent the Portfolio or the Fund in any way or otherwise be deemed to be
an agent of the Portfolio, the Fund or of Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall
receive an investment management fee as set forth in Schedule 1, attached hereto and
incorporated herein by reference. The management fee shall be accrued and computed
daily based on the average daily net assets of the Portfolio as determined at the
close of the New York Stock Exchange and payable monthly in arrears to Subadviser on
or before the 10th day of the next succeeding calendar month. If this Agreement
becomes effective or terminates before the end of any month, the investment
management fee for the period from the effective date to the end of such month or
from the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proration which such period bears to the full
month in which such effectiveness or termination occurs.
V. Expenses. Except for expenses specifically assumed or agreed to be paid by Subadviser
pursuant hereto, Subadviser shall not be liable for any expenses of Adviser, the Fund
or any Portfolio, including, without limitation, (i) interest and taxes; (ii)
brokerage commissions and other costs in connection with the purchase or sale of
securities or other investment instruments with respect to the Portfolio; and (iii)
Custodian fees and expenses. Subadviser will pay its own expenses incurred in
furnishing the services to be provided by it pursuant to this Agreement.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the
following documents and will furnish to Subadviser at its principal office all future
amendments and supplements to such documents, if any, as soon as practicable after
such documents become available:
A. The Articles of Incorporation of the Fund, as filed with the State of Minnesota,
as in effect on the date hereof and as amended from time to time ("Articles");
B. The by-laws of the Fund as in effect on the date hereof and as amended from time
to time ("By-Laws");
C. Certified resolutions of the Board authorizing the appointment of Adviser and
Subadviser and approving the form of the Advisory Agreement and this Agreement;
D. The Fund's Registration Statement under the 1940 Act and the Securities Act of
1933, as amended (the "1933 Act") on Form N-1A, as filed with the Securities and
Exchange Commission ("SEC") relating to the Portfolio and its shares and all
amendments thereto ("Registration Statement");
E. The Notification of Registration of the Fund under the 1940 Act on Form N-8A as
filed with the SEC and any amendments thereto;
F. The Portfolio's most recent prospectus (the "Prospectus");
G. Any proxy statements of the Fund sent to shareholders of the Portfolio for the
purpose of voting on matters affecting the Portfolio; and
H. Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or information
that Subadviser may reasonably request to enable it to perform its duties pursuant to
this Agreement.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting
brokers or dealers, if any, it shall use its best efforts to seek on behalf of
the Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, Subadviser shall consider all factors it
deems relevant, including the breadth of the market in and the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, Subadviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act")) provided to
Subadviser with respect to the Portfolio and/or other accounts over which
Subadviser exercises investment discretion. Subadviser may, in its
discretion, agree to pay a broker or dealer that furnishes such brokerage or
research services a higher commission than that which might have been charged
by another broker-dealer for effecting the same transactions, if Subadviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
Subadviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act).
Subadviser shall, upon request from Adviser, provide such periodic and special
reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they
relate.
B. In no instance will portfolio securities be purchased from or sold to
Subadviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolio at the same time it is selling
such securities for another client account and may sell securities for the
Portfolio at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory
requirements, and in compliance with such procedures of the Fund as may be in
effect from time to time, Subadviser may effectuate cross transactions between
the Portfolio and such other account if it deems this to be advantageous. The
Subadviser's affiliated broker/dealers may effectuate cross transactions
between the Portfolio and its customers in accordance with such procedures of
the Fund as may be in effect from time to time.
D. On occasions when Subadviser deems the purchase or sale of a security to be in
the best interest of the Fund as well as other clients of Subadviser,
Subadviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be purchased
or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Subadviser in the manner Subadviser considers to
be the most equitable and consistent with its fiduciary obligations to the
Fund and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by a sub-investment adviser of a registered investment company pursuant to
the 1940 Act and the rules and regulations promulgated thereunder with respect to
transactions on behalf of the Portfolio. In compliance with the requirements of Rule
31a-3 under the 1940 Act, Subadviser hereby agrees (A) that all records that it
maintains for the Portfolio are the property of the Fund, (B) to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records that it maintains for
the Fund and that are required to be maintained by Rule 31a-1 under the 1940 Act, and
(C) to surrender promptly to the Fund any records that it maintains for the Fund upon
request by the Fund; provided, however, Subadviser may retain copies of such records.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate,
such information, reports, evaluations, analyses and opinions as are required
by law or that the Board or Adviser, as appropriate, may reasonably require on
quarterly or annual timeframes, including, without limitation: compliance
reporting and certification with respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
B. Subadviser shall make available in person to the Board on an annual basis and
to Adviser personnel on a periodic basis the portfolio manager of the
Portfolio or an appropriate investment professional of Subadviser to review
the investments and the investment program of the Portfolio and the services
provided by Subadviser hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or
restrict (i) the freedom of Subadviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other persons,
firms, or corporations, or to engage in any other business activities, or (ii) the
right of any director, officer, or employee of Subadviser, who may also be a
director, officer, or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
XI. Subadviser's Use of the Services of Others. Subadviser 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 Subadviser or the Fund or Portfolio, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as Subadviser
may deem necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund or the Portfolio, as appropriate, or in
the discharge of Subadviser's overall responsibilities with respect to the other
accounts that it serves as investment manager or counselor.
The Subadviser may, at its own expense, delegate any or all of its duties and
responsibilities under this Agreement to its wholly-owned subsidiary, FMR Co., Inc.,
provided that the Subadviser remains responsible to the Adviser and the Fund for the
performance of all of its responsibilities and duties hereunder. The Subadviser will
compensate FMR Co., Inc. for its services to the Fund. Subject to prior notice to
the Adviser, the Subadviser may terminate the services of FMR Co, Inc. for the
Portfolio(s) and shall, at such time, assume the responsibilities of FMR Co., Inc.
with respect to the Fund.
XII. Liability of Subadviser; Indemnification. Neither Subadviser nor any of its
officers, directors, or employees, nor any person performing executive,
administrative, trading, or other functions for the Fund, the Portfolio (at the
direction or request of Subadviser) or Subadviser in connection with Subadviser's
discharge of its obligations undertaken or reasonably assumed with respect to this
Agreement (collectively, "Related Persons"), shall be liable for (i) any error of
judgment or mistake of law or for any loss suffered by the Fund or Portfolio or (ii)
any error of fact or mistake of law contained in any report or data provided by
Subadviser, except for any error, mistake or loss resulting from willful misfeasance,
bad faith, or gross negligence in the performance by Subadviser or such Related
Person of Subadviser's duties under this Agreement on behalf of the Fund or Portfolio
or from reckless disregard by Subadviser or any such Related Person of the duties of
Subadviser pursuant to this Agreement (each of which is referred to as a "Culpable
Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Subadviser from any responsibility or liability Subadviser may have under federal
statutes..
Subadviser shall indemnify Adviser and its Related Persons and hold them harmless
from and against any and all actions, suits or claims whether groundless or
meritorious and from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liabilities (collectively, "Damages")
arising directly or indirectly out of or in connection with the performance of
services by Subadviser or its Related Persons hereunder to the extent such Damages
result from a Culpable Act.
Adviser shall indemnify Subadviser and its Related Persons from and against any
Damages arising directly or indirectly out of or in connection with the performance of
services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any willful
misfeasance, bad faith, or gross negligence in the performance by Adviser or any of
its Related Persons of Adviser's duties under the Agreement or Advisory Agreement on
behalf of the Fund or Portfolio or from reckless disregard by the Adviser or any of
its Related Persons of the duties of Adviser pursuant to this Agreement or the
Advisory Agreement.
XIII. Representations of Subadviser. Subadviser represents, warrants, and agrees as
follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any
other applicable federal, Massachusetts or Delaware requirements, or the
applicable requirements of any federal regulatory or industry self-regulatory
agency, necessary to be met in order to perform the services contemplated by
this Agreement; (iv) has the authority to enter into and perform the services
contemplated by this Agreement; and (v) will promptly notify Adviser of the
occurrence of any event that would disqualify Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
1940 Act or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code")
complying with the requirements of Rule 17j-1 under the 1940 Act, as may be
amended from time to time, and, has provided the Adviser and the Fund with a
copy of the Subadviser Code, together with evidence of its adoption. The
Subadviser certifies that it has adopted procedures reasonably necessary to
prevent access persons as defined in Rule 17j-1 ("Access Persons") from
violating the Subadviser Code. On a quarterly basis, Subadviser will either;
(i) certify to Adviser that Subadviser and its Access Persons have complied
with Subadviser Code with respect to the Portfolio, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to
the Portfolio. In addition, Subadviser will furnish at least annually to
Adviser and the Board a written report that (a) describes any issues arising
under the Subadviser Code since the last report to the Board, including, but
not limited to, information about material violations of the Subadviser Code
with respect to the Portfolio and sanctions imposed in response to the
material violations and (b) certifies that the Subadviser has adopted
procedures reasonably necessary to prevent Access Persons from violating the
Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as
most recently filed with the SEC and, if not so filed, the its most recent
Part 2 of Form ADV, and will, promptly after filing any amendment to its Form
ADV with the SEC, and, if not so filed, any amendment to Part 2 of its Form
ADV, furnish a copy of such amendment to Adviser.
XIV. Representations of Adviser. Adviser represents, warrants, and agrees as follows:
A. Adviser (i) is registered as an investment adviser under Advisers Act and will
continue to be so registered for so long as this Agreement remains in effect;
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by its management agreement with the Fund; (iii) has
met, and will continue to meet for so long as this Agreement remains in
effect, any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary
to be met in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services contemplated by
this Agreement; and (v) will promptly notify Adviser of the occurrence of any
event that would disqualify Subadviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Adviser and the Fund have adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act, as may be amended from time to
time.
C. Adviser has provided Subadviser with a copy of its Form ADV as most recently
filed with the SEC and, if not so filed, the its most recent Part 2 of Form ADV,
and will, promptly after filing any amendment to its Form ADV with the SEC, and,
if not so filed, any amendment to Part 2 of its Form ADV, furnish a copy of
such amendment to Subadviser.
XV. Compliance with Applicable Regulations. In performing its duties hereunder,
Subadviser shall have compliance procedures reasonably calculated to ensure
compliance with all applicable provisions of the 1940 Act and the Advisers Act, and
any rules and regulations adopted thereunder; Subchapter M of the Code; the
provisions of the Registration Statement, as provided by Adviser to Subadviser; the
provisions of the Articles and the By-Laws of the Fund, as the same may be amended
from time to time, as provided by Adviser to Subadviser; and any other applicable
provisions of federal securities law.
XVI. Term of Agreement. This Agreement shall become effective with respect to the FI All
Cap Portfolio on the Effective Date and, with respect to any additional Portfolio, on
the date of receipt by the Adviser of notice from the Subadviser in accordance with
Section II hereof that the Subscriber is willing to serve as Subadviser with respect
to such Portfolio. Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the Effective Date with respect to the FI All
Cap Portfolio and, with respect to each additional Portfolio, for two years from the
date on which this Agreement becomes effective with respect to such Portfolio.
Thereafter, this Agreement shall continue in effect from year to year, with respect
to the Portfolio, subject to the termination provisions and all other terms and
conditions hereof, so long as (a) such continuation shall be specifically approved at
least annually (i) by either the Board, or by vote of a majority of the outstanding
voting securities of the Portfolio; (ii) in either event, by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of the
Directors of the Fund who are not interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval; and
(b) Subadviser shall not have notified the Fund, in writing, at least 60 days prior
to such approval that it does not desire such continuation.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the Board or
by a vote of a majority of the outstanding voting securities of the Portfolio on at
least 60 days' prior written notice to Subadviser. This Agreement may also be
terminated by Adviser: (i) on at least 60 days' prior written notice to Subadviser,
without the payment of any penalty; or (ii) upon material breach by Subadviser of any
of the representations and warranties set forth in Section XIII of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of such
breach. Subadviser may terminate this Agreement at any time, without the payment of
any penalty, on at least 60 days' prior notice to Adviser. This Agreement shall
terminate automatically in the event of its assignment, as such term is defined in
the 1940 Act, or upon termination of the Advisory Agreement. Any approval,
amendment, or termination of this Agreement by the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of any Portfolio shall be
effective to continue, amend or terminate this Agreement with respect to any such
Portfolio notwithstanding (i) that such action has not been approved by the holders
of a majority of the outstanding voting securities of any other Portfolio affected
thereby, and/or (ii) that such action has not been approved by the vote of a majority
of the outstanding voting securities of the Fund, unless such action shall be
required by any applicable law or otherwise.
XVIII. Use of Subadviser's Name. The parties agree that the name of Subadviser, the names
of any affiliates of Subadviser and any derivative, logo, trademark, service mark or
trade name are the valuable property of the Subadviser and its affiliates. Adviser
and the Fund shall have the right to use such name(s), derivatives, logos, trademarks
or service marks or trade names only with the prior written approval of Subadviser,
which approval shall not be unreasonably withheld or delayed so long as this
Agreement is in effect.
Upon termination of the Agreement, Adviser and the Fund shall forthwith cease to use
such name(s), derivatives, logos, trademarks, service marks or trade names. Adviser
and the Fund agree they will review with Subadviser any advertisement, sales
literature, or notice prior to its use that makes reference to Subadviser or its
affiliates or any such name(s), derivatives, logos, trademarks, service marks or
trade names, it being understood that Subadviser shall have no responsibility to
ensure of the adequacy of the form or content of such materials for purposes of the
1940 Act or other applicable laws and regulations. If Adviser or the Fund makes an
unauthorized use of Subadviser's names, derivatives, logos, trademarks, service marks
or trade names, the parties acknowledge that Subadviser shall suffer irreparable hard
for which monetary damages are inadequate and thus, Subadviser will be entitled to
injunctive relief.
XIX. Review of Fund Documents. During the term of this Agreement, Adviser shall furnish
to Subadviser at its principal office all prospectuses, proxy statements, reports to
shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to Subadviser or its clients in
any way, prior to the use thereof, and Adviser shall not use any such materials if
Subadviser reasonably objects in writing in five (5) days (or such other time as may
be mutually agreed, which would include longer time periods for review of the Fund's
prospectus and other parts of the registration statement) after receipt thereof.
XX. Confidentiality. All information furnished by one party to the other party
(including their respective agents, employees and representatives) hereunder shall be
treated as confidential and shall not be disclosed to third parties, except if it is
otherwise in the public domain or, with notice to the other party, as may be
necessary to comply with applicable laws, rules, regulations, subpoenas or court
orders. Without limiting the foregoing, Adviser acknowledges that the securities
holdings of the Portfolio(s) constitute information of value to Subadviser, and
agrees (1) not to use for any purpose, other than for Adviser or the Fund, or their
agents, to supervise or monitor Subadviser, the holdings or trade-related information
of the Fund; and (2) not to disclose the Portfolio(s)' holdings, except: (a) as
required by applicable law or regulation; (b) as required by state or federal
regulatory authorities; (c) to the Board, counsel to the Board, counsel to the Fund,
the administrator or any sub-administrator, the independent accounts and any other
agent of the Fund; or (d) as otherwise agreed to by the parties in writing. Further,
Adviser agrees that information supplied by Subadviser, including approved lists,
internal procedures, compliance procedures and any board materials, is valuable to
Subadviser, and Adviser agrees not to disclose any of the information contained in
such materials, except: (i) as required by applicable law or regulation; (ii) as
required by state or federal regulatory authorities; (iii) to the Board, counsel to
the Board, counsel to the Fund, the administrator or any sub-administrator, the
independent accountants and any other agent of the Fund; or (iv) as otherwise agreed
to by the parties in writing.
XXI. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. This
Agreement (including any exhibits hereto) may be amended at any time by written
mutual consent of the parties, subject to the requirements of the 1940 Act, the
Advisers Act, and rules and regulations promulgated and orders granted thereunder.
XXII. Notification. Subadviser will notify Adviser promptly of any change in the personnel
of Subadviser with responsibility for making investment decisions in relation to the
Portfolio or who have been authorized to give instructions to Custodian.
XXIII. Override Provisions. Notwithstanding any other provision of this Agreement:
A. Prior to this Agreement being approved by a vote of a majority of the Portfolio's
outstanding voting securities in accordance with the 1940 Act: (i) in no event
shall compensation paid to the Subadviser hereunder exceed the amount permitted
by Rule 15a-4 under the 1940 Act; (ii) the portion of the compensation payable by
the Fund to the Adviser under the terms of the Advisory Agreement with respect to
such Portfolio that is equal in amount to the compensation payable to the
Subadviser hereunder (the "Subadviser Escrow Amount") shall be held in an
interest-bearing escrow account with the Fund's custodian or a bank (the "Escrow
Account"); and (iii) this Agreement may be terminated at any time without the
payment of any penalty, by vote of the Board or by a vote of a majority of the
outstanding voting securities of the Portfolio on 10 days' prior written notice
to the Subadviser. The Subadviser Escrow Amount, including interest earned
thereon, shall be paid promptly after approval of this Agreement by the vote of a
majority of the Portfolio's outstanding voting securities in accordance with the
1940 Act, provided that such approval is obtained no later than 150 days after
the date of this Agreement.
B. If this Agreement is not approved by a vote of a majority of the Portfolio's
outstanding voting securities within the time period stated above, (i) this
Agreement shall immediately terminate; and (ii) the Subadviser shall receive from
the Escrow Account the lesser of: (a) the sum of the amount of any costs incurred
by the Subadviser in performing its duties under this Agreement prior to such
termination plus any interest earned on that amount, and (b) the sum of the
Subadviser Escrow Amount plus any interest earned on that amount.
XXIV. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts without giving effect to the conflicts of
laws principles thereof and the 1940 Act. To the extent that the applicable
laws of the Commonwealth of Massachusetts conflict with the applicable
provisions of the 1940 Act, the latter shall control.
B. Insurance. Adviser, the Fund and Subadviser each agree to maintain errors and
omissions or professional liability insurance coverage in an amount that is
reasonable in light of the nature and scope of its respective business
activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and understanding
of the parties hereto and shall supersede any prior agreements between the
parties relating to the subject matter hereof, and all such prior agreements
shall be deemed terminated upon the effectiveness of this Agreement.
E. Notice. Any notice under this Agreement shall be in writing, addressed and
delivered and mailed, postage prepaid, to the other party, with a copy to the
Fund, at the addressed below or such other address as such other party may
designate for the receipt of such notice.
If to Adviser: Aid Association for Lutherans
625 Fourth Avenue South
Minneapolis MN 55415
Attention: Investment Division
If to Subadviser: Fidelity Management & Research Company
82 Devonshire Street
Boston, MA 02109
Attention: General Counsel
F. Interpretation. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to its Articles or By-Laws, or any applicable statutory
or regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of its responsibility for and control of the
conduct of the affairs of the Portfolio.
G. Successors. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns.
H. If any provisions of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall be
deemed to be severable.
I. 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. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," broker," "investment adviser," "net assets," "sale," "sell," and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule,
regulation, or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is made less
restrictive by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
J. Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
FIDELITY MANAGEMENT & RESEARCH COMPANY
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
Schedule I
Dated as of January 1, 2002
Subadvisory Fees
FI All Cap Portfolio
Average Net Daily Assets Annual Rate
$0 - 100 million 0.60%
$100 - 500 million 0.55%
$500 - 750 million 0.50%
$750+ million 0.45%
EXHIBIT E
INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
T. Rowe Price Associates, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective
Date") by and among Aid Association for Lutherans, a fraternal benefit society organized and
existing under the laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a
corporation organized and existing under the laws of the State of Minnesota ("Fund"), and T.
Rowe Price Associates, Inc., a corporation organized and existing under the laws of the
State of Maryland ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day
of January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an
open-end investment company registered under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the TRP Growth Stock Portfolio
("Portfolio"), a separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment
supervisory management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as subadviser to furnish certain
investment advisory services to Adviser and the Portfolio and Subadviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the
parties hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment subadviser
with respect to the Portfolio for the period and on the terms set forth in this
Agreement, and (B) Subadviser hereby accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of
shares other than the Portfolio with respect to which Adviser desires to retain
Subadviser to render investment advisory services hereunder, Adviser shall so notify
Subadviser in writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If Subadviser is willing to render such services on the
terms provided for herein, it shall so notify Adviser in writing, whereupon such
series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from
time to time what investments shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held uninvested. Subadviser
shall perform these duties subject always to (1) the overall supervision of
Adviser and the Board of Directors of the Fund (the "Board"), (2) the Fund's
Articles and By-laws (as defined below), as amended from time to time, (3) the
stated investment objectives, policies and restrictions of the Portfolio as
set forth in the Fund's then current Registration Statement (as defined
below), (4) any additional policies or guidelines established by Adviser or
Board that have been furnished in writing to Subadviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of
the 1940 Act and the rules and regulations thereunder, and (6) the provisions
of the Internal Revenue Code of 1986, as amended (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the Code), as
amended from time to time. In accordance with Section VII, Subadviser shall
arrange for the execution of all orders for the purchase and sale of
securities and other investments for the Portfolio's account and will exercise
full discretion and act for the Fund in the same manner and with the same
force and effect as the Fund might or could do with respect to such purchases,
sales, or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases,
sales, or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of
the Portfolios assets. Subadviser shall affirm security transactions with
central depositories and advise the custodian of the Portfolio ("Custodian")
or such depositories or agents as may be designated by Custodian and Adviser
promptly of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, the commission and gross or net price,
the trade date and settlement date and the identity of the effecting broker or
dealer. Subadviser shall from time to time provide Custodian and Adviser with
evidence of authority of its personnel who are authorized to give instructions
to Custodian.
C. Unless Adviser advises Subadviser in writing that the right to vote proxies
has been expressly reserved to Adviser or the Fund or otherwise delegated to
another party, Subadviser shall exercise voting rights incident to any
securities held in the Portfolio without consultation with Adviser or Fund,
provided that Subadviser will follow any written instructions received from
Adviser or Fund with respect to voting as to particular issues. Subadviser
shall instruct the Custodian to respond to all corporate action matters
incident to the securities held in the Portfolio including, without
limitation, proofs of claim in bankruptcy and class action cases and shelf
registrations, provided such materials, including proxy solicitations, have
been forward to the Subadviser in a timely fashion by the Custodian.
D. Subadviser shall, upon Adviser's request, consult with Adviser to assist
Adviser in its development of strategic marketing plans for the Fund on or
before November 30 in each year for the following calendar year with respect
to the Portfolio and the variable contract for which it provides an underlying
investment choice. Subadviser shall also, from time to time, provide such
additional marketing support as Adviser may reasonably request, including,
without limitation, assistance in product roll-outs, on-going product training
and sales support, and development of sales strategies. Subadviser shall
coordinate all marketing support efforts with Adviser, including, without
limitation, the promotion of products, training of Adviser's field force,
seminars promoting the Portfolio and preparation of presentations for clients
(collectively referred to as the activities of "Wholesalers"). Wholesalers'
participation in on-site presentations, sales desk training, conferences, and
portfolio manager conference calls shall first be approved by Adviser.
E. Upon request of Adviser and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the
Portfolio for which market quotations are not readily available.
F. In the performance of its duties hereunder, Subadviser is and shall be an
independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for
or represent the Portfolio or the Fund in any way or otherwise be deemed to be
an agent of the Portfolio, the Fund or of Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall
receive an investment management fee as set forth in Schedule 1, attached hereto and
incorporated herein by reference. The management fee shall be payable monthly in
arrears to Subadviser on or before the 10th day of the next succeeding calendar
month. Adviser shall provide a worksheet with the monthly payment showing the
Portfolio's average daily net assets and the calculation of Subadvisers investment
management fee. If this Agreement becomes effective or terminates before the end of
any month, the investment management fee for the period from the effective date to
the end of such month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proration which such period
bears to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Subadviser will bear all expenses
incurred by it in the performance of its duties hereunder, other than those expenses
specifically assumed by the Fund hereunder. The Fund shall assume and shall pay all
brokers' and underwriting commissions chargeable to the Fund in connection with the
securities transactions to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the
following documents and will furnish to Subadviser at its principal office all future
amendments and supplements to such documents, if any, as soon as practicable after
such documents become available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to
time ("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended
from time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of
Adviser and Subadviser and approving the form of the Advisory Agreement
and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended (the "1933 Act") on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form
N-8A as filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus"); and
(7) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or
information that Subadviser may reasonably request to enable it to perform its
duties pursuant to this Agreement.
During the term of this Agreement, Adviser shall furnish to Subadviser at its
principal office all prospectuses, proxy statements, reports to shareholders,
advertisements, sales literature or other material prepared for distribution
to shareholders of the Fund or the public which refer to the Subadviser or its
clients in any way, at a reasonable time prior to the use thereof, and Adviser
shall not use any such materials if Subadviser reasonably objects in writing
five (5) business days (or such other time as may be mutually agreed) after
receipt thereof. Adviser shall ensure that materials prepared by employees or
agents of Adviser or its affiliates that refer to Subadviser or its clients in
any way are consistent with those materials previously approved by Subadviser
as referenced in the preceding sentence.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting
brokers or dealers, if any, it shall use its best efforts to seek on behalf of
the Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, Subadviser shall consider all factors it
deems relevant, including the breadth of the market in and the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, Subadviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act")) provided to
Subadviser with respect to the Portfolio and/or other accounts over which
Subadviser exercises investment discretion. Subadviser may, in its
discretion, agree to pay a broker or dealer that furnishes such brokerage or
research services a higher commission than that which might have been charged
by another broker-dealer for effecting the same transactions, if Subadviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
Subadviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act).
Subadviser shall, upon request from Adviser, provide such periodic and special
reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they
relate.
B. In no instance will portfolio securities be purchased from or sold to
Subadviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolio at the same time it is selling
such securities for another client account and may sell securities for the
Portfolio at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory
requirements, and in compliance with such procedures of the Fund as may be in
effect from time to time, Subadviser may effectuate cross transactions between
the Portfolio and such other account if it deems this to be advantageous.
D. On occasions when Subadviser deems the purchase or sale of a security to be in
the best interest of the Fund as well as other clients of Subadviser,
Subadviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be purchased
or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Subadviser in the manner Subadviser considers to
be the most equitable and consistent with its fiduciary obligations to the
Fund and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by Subadviser pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Portfolio. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Subadviser hereby
agrees (A) that all records that it maintains for the Portfolio are the property of
the Fund, (B) to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be maintained by
Rule 31a-1 under the 1940 Act, and (C) to surrender promptly to the Fund any records
that it maintains for the Fund upon request by the Fund; provided, however,
Subadviser may retain copies of such records.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate,
such information, reports, evaluations, analyses and opinions as are required
by law or that the Board or Adviser, as appropriate, may reasonably require,
including, without limitation: compliance reporting and certification with
respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Fair Valuation Determinations
B. Subadviser shall make available in person or via telephone to the Board and to
Adviser personnel of Subadviser as the Board or Adviser may reasonably request
to review the investments and the investment program of the Portfolio and the
services provided by Subadviser hereunder, provided that, the portfolio
manager of the Portfolio shall not be required to attend in person more than
one meeting per calendar year.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or
restrict (i) the freedom of Subadviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other persons,
firms, or corporations, or to engage in any other business activities, or (ii) the
right of any director, officer, or employee of Subadviser, who may also be a
director, officer, or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
XI. Subadviser's Use of the Services of Others. Subadviser 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 Subadviser or the Fund or Portfolio, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as Subadviser
may deem necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund or the Portfolio, as appropriate, or in
the discharge of Subadviser's overall responsibilities with respect to the other
accounts that it serves as investment manager or counselor.
XII. Liability of Subadviser; Indemnification. Neither Subadviser nor any of its
officers, directors, or employees ("Related Persons"), nor any person performing
executive, administrative, trading, or other functions for the Fund, the Portfolio
(at the direction or request of Subadviser) or Subadviser in connection with
Subadviser's discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement shall be liable for (i) any error of judgment or mistake of
law or for any loss suffered by the Fund or Portfolio or (ii) any error of fact or
mistake of law contained in any report or data provided by Subadviser, except for any
error, mistake or loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance by Subadviser or such Related Person of Subadviser's
duties on behalf of the Fund or Portfolio or from reckless disregard by Subadviser or
any such Related Person of the duties of Subadviser pursuant to this Agreement (each
of which is referred to as a "Culpable Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Subadviser from any responsibility or liability Subadviser may have under state or
federal statutes.
Subadviser shall indemnify Adviser and its Related Persons and hold them harmless
from and against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liabilities (collectively, "Damages") arising directly
or indirectly out of or in connection with the performance of services by Subadviser
or its Related Persons hereunder to the extent such Damages result from a Culpable
Act of Subadviser or its Related Persons.
Adviser shall indemnify Subadviser and its Related Persons from and against any
Damages arising directly or indirectly out of or in connection with the performance
of services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties by
Adviser or any of its Related Persons.
XIII. Representations of Subadviser. Subadviser represents, warrants, and agrees as
follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency, necessary to be met in
order to perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any
event that would disqualify Subadviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code")
complying with the requirements of Rule 17j-1 under the 1940 Act, as may be
amended from time to time, and, has provided the Adviser and the Fund with a
copy of the Subadviser Code, together with evidence of its adoption. The
Subadviser certifies that it has adopted procedures reasonably necessary to
prevent access persons as defined in Rule 17j-1 ("Access Persons") from
violating the Subadviser Code. On a quarterly basis, Subadviser will either;
(i) certify to Adviser that Subadviser and its Access Persons have complied
with Subadviser Code with respect to the Portfolio, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to
the Portfolio. In addition, Subadviser will furnish at least annually to
Adviser and the Board a written report that (a) describes any issues arising
under the Subadviser Code since the last report to the Board, including, but
not limited to, information about material violations of the Subadviser Code
with respect to the Portfolio and sanctions imposed in response to the
material violations and (b) certifies that the Subadviser has adopted
procedures reasonably necessary to prevent Access Persons from violating the
Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as
most recently filed with the SEC and, if not so filed, the its most recent
Part 2 of Form ADV, and will, promptly after filing any amendment to its Form
ADV with the SEC, and, if not so filed, any amendment to Part 2 of its Form
ADV, furnish a copy of such amendment to Adviser.
XIV. Representation of Adviser. Adviser represents, warrants and agrees that Adviser (i)
is registered as an investment adviser under Advisers Act and will continue to be so
registered for so long as this Agreement remains in effect; (ii) is not prohibited by
the 1940 Act or the Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any event
that would disqualify Subadviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
XV. Compliance with Applicable Regulations. In performing its duties hereunder,
Subadviser shall act in conformity at all times with all applicable provisions of the
1940 Act and the Advisers Act, and any rules and regulations adopted thereunder;
Subchapter M of the Code; the provisions of the Registration Statement; the
provisions of the Articles and the By-Laws of the Fund, as the same may be amended
from time to time; and any other applicable provisions of state or federal law.
XVI. Term of Agreement. This Agreement shall become effective with respect to the TRP
Growth Stock Portfolio on the Effective Date and, with respect to any additional
Portfolio, on the date of receipt by the Adviser of notice from the Subadviser in
accordance with Section II hereof that the Subscriber is willing to serve as
Subadviser with respect to such Portfolio. Unless sooner terminated as provided
herein, this Agreement shall continue in effect for two years from the Effective Date
with respect to the TRP Growth Stock Portfolio and, with respect to each additional
Portfolio, for two years from the date on which this Agreement becomes effective with
respect to such Portfolio. Thereafter, this Agreement shall continue in effect from
year to year, with respect to the Portfolio, subject to the termination provisions
and all other terms and conditions hereof, so long as (a) such continuation shall be
specifically approved at least annually (i) by either the Board, or by vote of a
majority of the outstanding voting securities of the Portfolio; (ii) in either event,
by the vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval; and (b) Subadviser shall not have notified the Fund, in
writing, at least 60 days prior to such approval that it does not desire such
continuation. Subadviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or
any extension, renewal, or amendment hereof.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the Board or
by a vote of a majority of the outstanding voting securities of the Portfolio on at
least 60 days' prior written notice to Subadviser. This Agreement may also be
terminated by Adviser: (i) on at least 60 days' prior written notice to Subadviser,
without the payment of any penalty; (ii) upon material breach by Subadviser of any of
the representations and warranties set forth in Section XIII of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of such
breach; or (iii) if Subadviser becomes unable to discharge its duties and obligations
under this Agreement. Subadviser may terminate this Agreement at any time, without
the payment of any penalty, on at least 60 days' prior notice to Adviser. This
Agreement shall terminate automatically in the event of its assignment, as such term
is defined in the 1940 Act, or upon termination of the Advisory Agreement. Any
approval, amendment, or termination of this Agreement by the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of any Portfolio shall
be effective to continue, amend or terminate this Agreement with respect to any such
Portfolio notwithstanding (i) that such action has not been approved by the holders
of a majority of the outstanding voting securities of any other Portfolio affected
thereby, and/or (ii) that such action has not been approved by the vote of a majority
of the outstanding voting securities of the Fund, unless such action shall be
required by any applicable law or otherwise.
XVIII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. This
Agreement (including any exhibits hereto) may be amended at any time by written
mutual consent of the parties, subject to the requirements of the 1940 Act and rules
and regulations promulgated and orders granted thereunder.
XIX. Notification. Subadviser will notify Adviser promptly of any change in the portfolio
manager of Subadviser with primary responsibility for making investment decisions in
relation to the Portfolio or who have been authorized to give instructions to
Custodian.
XX. Override Provisions. Notwithstanding any other provision of this Agreement:
A. Prior to this Agreement being approved by a vote of a majority of the Portfolio's
outstanding voting securities in accordance with the 1940 Act: (i) in no event
shall compensation paid to the Subadviser hereunder exceed the amount permitted
by Rule 15a-4 under the 1940 Act; (ii) the portion of the compensation payable by
the Fund to the Adviser under the terms of the Advisory Agreement with respect to
such Portfolio that is equal in amount to the compensation payable to the
Subadviser hereunder (the "Subadviser Escrow Amount") shall be held in an
interest-bearing escrow account with the Fund's custodian or a bank (the "Escrow
Account"); and (iii) this Agreement may be terminated at any time without the
payment of any penalty, by vote of the Board or by a vote of a majority of the
outstanding voting securities of the Portfolio on 10 days' prior written notice
to the Subadviser. The Subadviser Escrow Amount, including interest earned
thereon, shall be paid promptly after approval of this Agreement by the vote of a
majority of the Portfolio's outstanding voting securities in accordance with the
1940 Act, provided that such approval is obtained no later than 150 days after
the date of this Agreement.
B. If this Agreement is not approved by a vote of a majority of the Portfolio's
outstanding voting securities within the time period stated above, (i) this
Agreement shall immediately terminate; and (ii) the Subadviser shall receive from
the Escrow Account the lesser of: (a) the sum of the amount of any costs incurred
by the Subadviser in performing its duties under this Agreement prior to such
termination plus any interest earned on that amount, and (b) the sum of the
Subadviser Escrow Amount plus any interest earned on that amount.
XXI. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of Minnesota without giving effect to the conflicts of laws
principles thereof and the 1940 Act. To the extent that the applicable laws
of the State of Minnesota conflict with the applicable provisions of the 1940
Act, the latter shall control.
B. Insurance. Subadviser agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of Subadviser's business activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties relating to the subject matter hereof, and all such prior
agreements shall be deemed terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Articles or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of its responsibility for and
control of the conduct of the affairs of the Portfolio.
F. 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. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," broker," "investment adviser," "net assets," "sale," "sell," and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule,
regulation, or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is made less
restrictive by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
T. ROWE PRICE ASSOCIATES, INC.
Attest:_______________________ By:________________________________
Name:_________________________ Name:______________________________
Title:_____________________________
Schedule I
Dated as of January 1, 2002
Subadvisory Fees
TRP Growth Stock Portfolio
Average Daily Net Assets Annual Rate
$0 - $50 million 0.45%
$50 - $500 million 0.40%
Above $500 million 0.35%
EXHIBIT F
INVESTMENT SUBADVISORY AGREEMENT
By and Among
Aid Association for Lutherans
and
LB Series Fund, Inc.
and
T. Rowe Price International, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of _______, 2002, (the "Effective
Date") by and among Aid Association for Lutherans, a fraternal benefit society organized and
existing under the laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a
corporation organized and existing under the laws of the State of Minnesota ("Fund"), and T.
Rowe Price International, Inc., a corporation organized and existing under the laws of the
State of Maryland ("Subadviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the 1st day
of January, 2002 ("Advisory Agreement") with the Fund, which is engaged in business as an
open-end investment company registered under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the World Growth Portfolio ("Portfolio"),
a separate series of the Fund; and
WHEREAS, Subadviser is engaged principally in the business of rendering investment
supervisory management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Subadviser as subadviser to furnish certain
investment advisory services to Adviser and the Portfolio and Subadviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the
parties hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Subadviser as its investment subadviser
with respect to the Portfolio for the period and on the terms set forth in this
Agreement, and (B) Subadviser hereby accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
II. Additional Series. In the event that the Fund establishes one or more series of
shares other than the Portfolio with respect to which Adviser desires to retain
Subadviser to render investment advisory services hereunder, Adviser shall so notify
Subadviser in writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If Subadviser is willing to render such services on the
terms provided for herein, it shall so notify Adviser in writing, whereupon such
series shall become a Portfolio hereunder.
III. Duties of Subadviser.
A. Subadviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from
time to time what investments shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held uninvested. Subadviser
shall perform these duties subject always to (1) the overall supervision of
Adviser and the Board of Directors of the Fund (the "Board"), (2) the Fund's
Articles and By-laws (as defined below), as amended from time to time, (3) the
stated investment objectives, policies and restrictions of the Portfolio as
set forth in the Fund's then current Registration Statement (as defined
below), (4) any additional policies or guidelines established by Adviser or
Board that have been furnished in writing to Subadviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of
the 1940 Act and the rules and regulations thereunder, and (6) the provisions
of the Internal Revenue Code of 1986, as amended (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the Code), as
amended from time to time. In accordance with Section VII, Subadviser shall
arrange for the execution of all orders for the purchase and sale of
securities and other investments for the Portfolio's account and will exercise
full discretion and act for the Fund in the same manner and with the same
force and effect as the Fund might or could do with respect to such purchases,
sales, or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases,
sales, or other transactions.
B. Subadviser shall have no responsibility with respect to maintaining custody of
the Portfolios assets. Subadviser shall affirm security transactions with
central depositories and advise the custodian of the Portfolio ("Custodian")
or such depositories or agents as may be designated by Custodian and Adviser
promptly of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, the commission and gross or net price,
the trade date and settlement date and the identity of the effecting broker or
dealer. Subadviser shall from time to time provide Custodian and Adviser with
evidence of authority of its personnel who are authorized to give instructions
to Custodian.
C. Unless Adviser advises Subadviser in writing that the right to vote proxies
has been expressly reserved to Adviser or the Fund or otherwise delegated to
another party, Subadviser shall exercise voting rights incident to any
securities held in the Portfolio without consultation with Adviser or Fund,
provided that Subadviser will follow any written instructions received from
Adviser or Fund with respect to voting as to particular issues. Subadviser
shall instruct the Custodian to respond to all corporate action matters
incident to the securities held in the Portfolio including, without
limitation, proofs of claim in bankruptcy and class action cases and shelf
registrations, provided such materials, including proxy solicitations, have
been forward to the Subadviser in a timely fashion by the Custodian.
D. Subadviser shall, upon Adviser's request, consult with Adviser to assist
Adviser in its development of strategic marketing plans for the Fund on or
before November 30 in each year for the following calendar year with respect
to the Portfolio and the variable contract for which it provides an underlying
investment choice. Subadviser shall also, from time to time, provide such
additional marketing support as Adviser may reasonably request, including,
without limitation, assistance in product roll-outs, on-going product training
and sales support, and development of sales strategies. Subadviser shall
coordinate all marketing support efforts with Adviser, including, without
limitation, the promotion of products, training of Adviser's field force,
seminars promoting the Portfolio and preparation of presentations for clients
(collectively referred to as the activities of "Wholesalers"). Wholesalers'
participation in on-site presentations, sales desk training, conferences, and
portfolio manager conference calls shall first be approved by Adviser.
E. Upon request of Adviser and/or Fund, Subadviser shall provide assistance in
connection with the determination of the fair value of securities in the
Portfolio for which market quotations are not readily available.
F. In the performance of its duties hereunder, Subadviser is and shall be an
independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for
or represent the Portfolio or the Fund in any way or otherwise be deemed to be
an agent of the Portfolio, the Fund or of Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Subadviser shall
receive an investment management fee as set forth in Schedule 1, attached hereto and
incorporated herein by reference. The management fee shall be payable monthly in
arrears to Subadviser on or before the 10th day of the next succeeding calendar
month. Adviser shall provide a worksheet with the monthly payment showing the
Portfolio's average daily net assets and the calculation of Subadvisers investment
management fee. If this Agreement becomes effective or terminates before the end of
any month, the investment management fee for the period from the effective date to
the end of such month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proration which such period
bears to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Subadviser will bear all expenses
incurred by it in the performance of its duties hereunder, other than those expenses
specifically assumed by the Fund hereunder. The Fund shall assume and shall pay all
brokers' and underwriting commissions chargeable to the Fund in connection with the
securities transactions to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Subadviser with copies of each of the
following documents and will furnish to Subadviser at its principal office all future
amendments and supplements to such documents, if any, as soon as practicable after
such documents become available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to
time ("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended
from time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of
Adviser and Subadviser and approving the form of the Advisory Agreement
and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended (the "1933 Act") on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form
N-8A as filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus"); and
(7) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Subadviser with any further documents, materials or
information that Subadviser may reasonably request to enable it to perform its
duties pursuant to this Agreement.
During the term of this Agreement, Adviser shall furnish to Subadviser at its
principal office all prospectuses, proxy statements, reports to shareholders,
advertisements, sales literature or other material prepared for distribution
to shareholders of the Fund or the public which refer to the Subadviser or its
clients in any way, at a reasonable time prior to the use thereof, and Adviser
shall not use any such materials if Subadviser reasonably objects in writing
five (5) business days (or such other time as may be mutually agreed) after
receipt thereof. Adviser shall ensure that materials prepared by employees or
agents of Adviser or its affiliates that refer to Subadviser or its clients in
any way are consistent with those materials previously approved by Subadviser
as referenced in the preceding sentence.
VII. Portfolio Transactions.
A. Subadviser agrees that, in executing portfolio transactions and selecting
brokers or dealers, if any, it shall use its best efforts to seek on behalf of
the Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, Subadviser shall consider all factors it
deems relevant, including the breadth of the market in and the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, Subadviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act")) provided to
Subadviser with respect to the Portfolio and/or other accounts over which
Subadviser exercises investment discretion. Subadviser may, in its
discretion, agree to pay a broker or dealer that furnishes such brokerage or
research services a higher commission than that which might have been charged
by another broker-dealer for effecting the same transactions, if Subadviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
Subadviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act).
Subadviser shall, upon request from Adviser, provide such periodic and special
reports describing any such brokerage and research services received and the
incremental commissions, net price or other consideration to which they
relate.
B. In no instance will portfolio securities be purchased from or sold to
Subadviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
C. Subadviser may buy securities for the Portfolio at the same time it is selling
such securities for another client account and may sell securities for the
Portfolio at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory
requirements, and in compliance with such procedures of the Fund as may be in
effect from time to time, Subadviser may effectuate cross transactions between
the Portfolio and such other account if it deems this to be advantageous.
D. On occasions when Subadviser deems the purchase or sale of a security to be in
the best interest of the Fund as well as other clients of Subadviser,
Subadviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be purchased
or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Subadviser in the manner Subadviser considers to
be the most equitable and consistent with its fiduciary obligations to the
Fund and to its other clients.
VIII. Ownership of Records. Subadviser shall maintain all books and records required to be
maintained by Subadviser pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Portfolio. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Subadviser hereby
agrees (A) that all records that it maintains for the Portfolio are the property of
the Fund, (B) to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be maintained by
Rule 31a-1 under the 1940 Act, and (C) to surrender promptly to the Fund any records
that it maintains for the Fund upon request by the Fund; provided, however,
Subadviser may retain copies of such records.
IX. Reports and Meetings.
A. Subadviser shall furnish to the Board or Adviser, or both, as appropriate,
such information, reports, evaluations, analyses and opinions as are required
by law or that the Board or Adviser, as appropriate, may reasonably require,
including, without limitation: compliance reporting and certification with
respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Fair Valuation Determinations
B. Subadviser shall make available in person or via telephone to the Board and to
Adviser personnel of Subadviser as the Board or Adviser may reasonably request
to review the investments and the investment program of the Portfolio and the
services provided by Subadviser hereunder, provided that, the portfolio
manager of the Portfolio shall not be required to attend in person more than
one meeting per calendar year.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or
restrict (i) the freedom of Subadviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other persons,
firms, or corporations, or to engage in any other business activities, or (ii) the
right of any director, officer, or employee of Subadviser, who may also be a
director, officer, or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
XI. Subadviser's Use of the Services of Others. Subadviser 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 Subadviser or the Fund or Portfolio, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as Subadviser
may deem necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund or the Portfolio, as appropriate, or in
the discharge of Subadviser's overall responsibilities with respect to the other
accounts that it serves as investment manager or counselor.
XII. Liability of Subadviser; Indemnification. Neither Subadviser nor any of its
officers, directors, or employees ("Related Persons"), nor any person performing
executive, administrative, trading, or other functions for the Fund, the Portfolio
(at the direction or request of Subadviser) or Subadviser in connection with
Subadviser's discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement shall be liable for (i) any error of judgment or mistake of
law or for any loss suffered by the Fund or Portfolio or (ii) any error of fact or
mistake of law contained in any report or data provided by Subadviser, except for any
error, mistake or loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance by Subadviser or such Related Person of Subadviser's
duties on behalf of the Fund or Portfolio or from reckless disregard by Subadviser or
any such Related Person of the duties of Subadviser pursuant to this Agreement (each
of which is referred to as a "Culpable Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Subadviser from any responsibility or liability Subadviser may have under state or
federal statutes.
Subadviser shall indemnify Adviser and its Related Persons and hold them harmless
from and against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liabilities (collectively, "Damages") arising directly
or indirectly out of or in connection with the performance of services by Subadviser
or its Related Persons hereunder to the extent such Damages result from a Culpable
Act of Subadviser or its Related Persons.
Adviser shall indemnify Subadviser and its Related Persons from and against any
Damages arising directly or indirectly out of or in connection with the performance
of services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties by
Adviser or any of its Related Persons.
XIII. Representations of Subadviser. Subadviser represents, warrants, and agrees as
follows:
A. Subadviser (i) is registered as an investment adviser under Advisers Act and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency, necessary to be met in
order to perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any
event that would disqualify Subadviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Subadviser has adopted a written code of ethics (the "Subadviser Code")
complying with the requirements of Rule 17j-1 under the 1940 Act, as may be
amended from time to time, and, has provided the Adviser and the Fund with a
copy of the Subadviser Code, together with evidence of its adoption. The
Subadviser certifies that it has adopted procedures reasonably necessary to
prevent access persons as defined in Rule 17j-1 ("Access Persons") from
violating the Subadviser Code. On a quarterly basis, Subadviser will either;
(i) certify to Adviser that Subadviser and its Access Persons have complied
with Subadviser Code with respect to the Portfolio, or (ii) identify any
material violations of the Subadviser Code which have occurred with respect to
the Portfolio. In addition, Subadviser will furnish at least annually to
Adviser and the Board a written report that (a) describes any issues arising
under the Subadviser Code since the last report to the Board, including, but
not limited to, information about material violations of the Subadviser Code
with respect to the Portfolio and sanctions imposed in response to the
material violations and (b) certifies that the Subadviser has adopted
procedures reasonably necessary to prevent Access Persons from violating the
Subadviser Code.
C. Subadviser has provided Adviser and the Fund with a copy of its Form ADV as
most recently filed with the SEC and, if not so filed, the its most recent
Part 2 of Form ADV, and will, promptly after filing any amendment to its Form
ADV with the SEC, and, if not so filed, any amendment to Part 2 of its Form
ADV, furnish a copy of such amendment to Adviser.
XIV. Representation of Adviser. Adviser represents, warrants and agrees that Adviser (i)
is registered as an investment adviser under Advisers Act and will continue to be so
registered for so long as this Agreement remains in effect; (ii) is not prohibited by
the 1940 Act or the Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as this Agreement
remains in effect, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services contemplated by this Agreement;
(iv) has the authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any event
that would disqualify Subadviser from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
XV. Compliance with Applicable Regulations. In performing its duties hereunder,
Subadviser shall act in conformity at all times with all applicable provisions of the
1940 Act and the Advisers Act, and any rules and regulations adopted thereunder;
Subchapter M of the Code; the provisions of the Registration Statement; the
provisions of the Articles and the By-Laws of the Fund, as the same may be amended
from time to time; and any other applicable provisions of state or federal law.
XVI. Term of Agreement. This Agreement shall become effective with respect to the TRP
Growth Stock Portfolio on the Effective Date and, with respect to any additional
Portfolio, on the date of receipt by the Adviser of notice from the Subadviser in
accordance with Section II hereof that the Subscriber is willing to serve as
Subadviser with respect to such Portfolio. Unless sooner terminated as provided
herein, this Agreement shall continue in effect for two years from the Effective Date
with respect to the TRP Growth Stock Portfolio and, with respect to each additional
Portfolio, for two years from the date on which this Agreement becomes effective with
respect to such Portfolio. Thereafter, this Agreement shall continue in effect from
year to year, with respect to the Portfolio, subject to the termination provisions
and all other terms and conditions hereof, so long as (a) such continuation shall be
specifically approved at least annually (i) by either the Board, or by vote of a
majority of the outstanding voting securities of the Portfolio; (ii) in either event,
by the vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval; and (b) Subadviser shall not have notified the Fund, in
writing, at least 60 days prior to such approval that it does not desire such
continuation. Subadviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or
any extension, renewal, or amendment hereof.
XVII. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the Board or
by a vote of a majority of the outstanding voting securities of the Portfolio on at
least 60 days' prior written notice to Subadviser. This Agreement may also be
terminated by Adviser: (i) on at least 60 days' prior written notice to Subadviser,
without the payment of any penalty; (ii) upon material breach by Subadviser of any of
the representations and warranties set forth in Section XIII of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of such
breach; or (iii) if Subadviser becomes unable to discharge its duties and obligations
under this Agreement. Subadviser may terminate this Agreement at any time, without
the payment of any penalty, on at least 60 days' prior notice to Adviser. This
Agreement shall terminate automatically in the event of its assignment, as such term
is defined in the 1940 Act, or upon termination of the Advisory Agreement. Any
approval, amendment, or termination of this Agreement by the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of any Portfolio shall
be effective to continue, amend or terminate this Agreement with respect to any such
Portfolio notwithstanding (i) that such action has not been approved by the holders
of a majority of the outstanding voting securities of any other Portfolio affected
thereby, and/or (ii) that such action has not been approved by the vote of a majority
of the outstanding voting securities of the Fund, unless such action shall be
required by any applicable law or otherwise.
XVIII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. This
Agreement (including any exhibits hereto) may be amended at any time by written
mutual consent of the parties, subject to the requirements of the 1940 Act and rules
and regulations promulgated and orders granted thereunder.
XIX. Notification. Subadviser will notify Adviser promptly of any change in the portfolio
manager of Subadviser with primary responsibility for making investment decisions in
relation to the Portfolio or who have been authorized to give instructions to
Custodian.
XX. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of Minnesota without giving effect to the conflicts of laws
principles thereof and the 1940 Act. To the extent that the applicable laws
of the State of Minnesota conflict with the applicable provisions of the 1940
Act, the latter shall control.
B. Insurance. Subadviser agrees to maintain errors and omissions or professional
liability insurance coverage in an amount that is reasonable in light of the
nature and scope of Subadviser's business activities.
C. Captions. The captions contained 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.
D. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties relating to the subject matter hereof, and all such prior
agreements shall be deemed terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Articles or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of its responsibility for and
control of the conduct of the affairs of the Portfolio.
F. 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. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," broker," "investment adviser," "net assets," "sale," "sell," and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule,
regulation, or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is made less
restrictive by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized signatories as of the date and year first above written.
AID ASSOCIATION FOR LUTHERANS
Attest:________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_____________________________
LB SERIES FUND, INC.
Attest:________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_____________________________
T. ROWE PRICE INTERNATIONAL, INC.
Attest:________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_____________________________
SCHEDULE 1
Average Daily Net Assets Annual Rate
$0 to $20 Million .75%
Above $20 to $50 Million .60%
Above $50 to $200 Million .50%
Above $200 Million .50%*
Above $500 Million .45%*
*When average daily net assets exceed this amount, the annual rate asterisked is applicable
to all amounts in the World Growth Portfolio of LB Series Fund, Inc.
For purposes of determining breakpoints, assets invested in the Lutheran Brotherhood World
Growth Fund shall be included in determining average daily net assets.
LB SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
VOTING INSTRUCTION FORM FOR
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on April 10, 2002
The undersigned hereby appoints Rolf F. Bjelland, John C. Bjork, Frederick P. Johnson, Brenda J. Pederson or any of them true and lawful proxies, with power of substitution, to represent and vote all shares which the undersigned is entitled to vote at the Special Meeting of Shareholders to be held at 625 Fourth Avenue South, Minneapolis, Minnesota 55415 at 8:30 a.m. on April 10, 2002, or at any adjournments thereof, on the matters set forth and described in the accompanying Notice of Special Meeting and Proxy Statement. Receipt of the Notice of Special Meeting and Proxy Statement is hereby acknowledged. The Board of Directors recommends a vote "For" each proposal.
Discretionary authority is hereby conferred as to all other matters as may properly come before the meeting.
VOTE VIA THE INTERNET: https://vote.proxy-direct.com
VOTE VIA THE TELEPHONE: 1-800-597-7836
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CONTROL NUMBER: 999 9999 9999 999
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Note: Please sign exactly as your name appears hereon. If
shares are held jointly, either holder may sign. Corporate
proxies should be signed by an authorized officer.
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Contract Owner Signature
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Co-owner Signature
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Date
[Portfolio name(s) will print here]
BE SURE TO VOTE YOUR SHARES ON THE REVERSE SIDE
THIS VOTING INSTRUCTION FORM IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE LB SERIES FUND, INC. YOU MUST MARK THE BOX "ABSTAIN" IF YOU WISH TO ABSTAIN. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THESE MATTERS. WHEN THIS VOTING INSTRUCTION FORM IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES MADE ON THIS FORM. IF NO CHOICE IS INDICATED ON THIS FORM, THE VOTING INSTRUCTION WILL BE DEEMED TO BE AFFIRMATIVE ON THESE MATTERS.
[ ] To vote FOR all Portfolios on all Proposals mark this box. (No other vote is necessary.)
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example [X]
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement
between the LB Series Fund, Inc. and Aid
Association for Lutherans for the following
Portfolios:
[Opportunity Growth Portfolio] [ ] [ ] [ ]
[FTI Small Cap Growth Portfolio] [ ] [ ] [ ]
[MFS Mid Cap Growth Portfolio] [ ] [ ] [ ]
[Mid Cap Growth Portfolio] [ ] [ ] [ ]
[World Growth Portfolio] [ ] [ ] [ ]
[FI All Cap Portfolio] [ ] [ ] [ ]
[Growth Portfolio] [ ] [ ] [ ]
[MFS Investors Growth Portfolio] [ ] [ ] [ ]
[TRP Growth Stock Portfolio] [ ] [ ] [ ]
[Value Portfolio] [ ] [ ] [ ]
[High Yield Portfolio] [ ] [ ] [ ]
[Income Portfolio] [ ] [ ] [ ]
[Limited Maturity Bond Portfolio] [ ] [ ] [ ]
[Money Market Portfolio] [ ] [ ] [ ]
2. A. To approve a new investment subadvisory [ ] [ ] [ ]
agreement by and among Aid Association for
Lutherans, LB Series Fund, Inc. and Franklin
Advisers, Inc. for the FTI Small Cap Growth
Portfolio
B. To approve a new investment subadvisory
agreement by and among Aid Association for
Lutherans, LB Series Fund, Inc. and
Massachusetts Financial Services Company for the
following Portfolios:
[MFS Mid Cap Growth Portfolio] [ ] [ ] [ ]
[MFS Investors Growth Portfolio] [ ] [ ] [ ]
C. To approve a new investment subadvisory [ ] [ ] [ ]
agreement by and among Aid Association for
Lutherans, LB Series Fund, Inc. and Fidelity
Management & Research Company for the FI All Cap
Portfolio
D. To approve a new investment subadvisory [ ] [ ] [ ]
agreement by and among Aid Association for
Lutherans, LB Series Fund, Inc. and T. Rowe
Price Associates, Inc. for the TRP Growth Stock
Portfolio
E. To approve a new investment subadvisory [ ] [ ] [ ]
agreement by and among Aid Association for
Lutherans, LB Series Fund, Inc. and T. Rowe
Price International, Inc. for the World Growth
Portfolio
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN YOUR INSTRUCTION FORM TODAY!
Footnotes:
- For purposes of determining average daily net assets, the assets of Lutheran Brotherhood World Growth Fund are combined with the assets of the Portfolio.
- When average daily net assets exceed this amount, the indicated annual rate is applicable to all assets of the Portfolio.
- The Portfolio's inception date was November 30, 2001.
- All fund data are as of 12/31/01, except as noted for the funds advised by Fidelity Management & Research Company ("FMR"). For funds advised by FMR, fund data are as of the fiscal year end noted in the chart or as of October 31, 2001, if fiscal year end figures are not yet available.
- For funds advised by FMR, the figures shown are average net assets computed on the basis of average net assets of each fund or class at the close of business on each business day throughout its fiscal period.
- For funds advised by FMR, the figures shown represent the ratio of net advisory fees to average net assets paid to FMR.
- The net asset figure is based on internal Massachusetts Financial Services Company records.
- FMR has entered into subadvisory agreements with Fidelity Management & Research (U.K.) Inc. and Fidelity Management & Research (Far East) Inc. with respect to the fund.
- FMR Co., Inc. ("FMRC") serves as subadviser for the fund. FMR is primarily responsible for choosing investments for the fund. FMRC is a wholly owned subsidiary of FMR.
- Less than a complete fiscal year.
- Annualized.
- Reflects reductions for any expense reimbursement paid by or due from FMR pursuant to voluntary or state expense limitations.
- FMR Co., Inc. ("FMRC") serves as sub-subadviser for the fund. FMR is primarily responsible for choosing investments for the fund.
- The annual rate of compensation shown is based on the aggregate advisory fee paid expressed as a percentage of the fund's average net assets.
- The net asset figure is based on internal T. Rowe Price market value records.
- Effective January 1, 2002, T. Rowe Price Associates, Inc. has voluntarily agreed to waive a portion of its sub-advisory fees for certain registered investment companies where it serves as subadviser to Aetna Portfolio Partners, Inc. The fee reduction is based on the combined asset level of the subadvised portfolios, and ranges between 0% - 10% of the total subadvisory fees paid.
- T. Rowe Price Associates, Inc. has agreed to waive its fees so that at $200 million the subadvisory fee would be .40% on all assets.
- T. Rowe Price Associates, Inc. has voluntarily agreed to waive a portion of its subadvisory fees for certain registered investment companies where it serves as subadviser to Jackson National. The fee reduction is based on the combined asset level of the subadvised portfolios and ranges between 0% - - 10% of the total subadvisory fees paid. Currently, the fee reduction is 5%.
- T. Rowe Price International, Inc. has agreed to waive its fees so that at $500 million the subadvisory fee would be .45%.
- T. Rowe Price International, Inc. has agreed to waive its fees so that at $200 million the subadvisory fee would be .50% on all assets.