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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 2000
FILE NOS.
333-83423
811-9491
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 1
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 2
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USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
55 GREENS FARMS ROAD
WESTPORT, CT 06881
(888) 247-9744
-----------------------------
GARY TENKMAN
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
COPIES OF COMMUNICATIONS TO:
MATTHEW G. MALONEY, ESQ.
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L STREET, N.W
WASHINGTON, D.C. 20037
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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QUESTIONS?
Call toll free 1-877-833-7113
or your investment representative.
USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST
GROWTH FUND
GLOBAL OPPORTUNITIES FUND
FIXED INCOME FUND
MONEY MARKET FUND
DIVERSIFIED ASSETS FUND
PROSPECTUS
MAY 1, 2000
Shares of each Fund are sold exclusively to certain insurance companies in
connection with particular variable annuity contracts and/or variable life
insurance policies they issue. The insurance companies invest in shares of the
Funds in accordance with instructions received from owners of the applicable
annuity or life insurance policy.
This Prospectus must be accompanied by a current prospectus for the variable
annuity contracts or variable life insurance contracts that invest in the Funds.
The Securities and Exchange Commission has not approved or disapproved the
shares described in this Prospectus or determined whether this Prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
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RISK/RETURN SUMMARY; INVESTMENT OBJECTIVES, PRINCIPAL
INVESTMENT STRATEGIES AND RELATED RISKS
Carefully review this 3 Overview
important section, which
summarizes each fund's 4-5 GROWTH FUND
investments, strategies and Investment Objective and Principal Investment
risks. Strategies
Principal Investment Risks
Performance Information
6-8 GLOBAL OPPORTUNITIES FUND
Investment Objective and Principal Investment
Strategies
Principal Investment Risks
Performance Information
9-11 FIXED INCOME FUND
Investment Objective and Principal Investment
Strategies
Principal Investment Risks
Performance Information
12-13 MONEY MARKET FUND
Investment Objective and Principal Investment
Strategies
Principal Investment Risks
Performance Information
14-16 DIVERSIFIED ASSETS FUND
Investment Objective and Principal Investment
Strategies
Principal Investment Risks
Performance Information
17 OTHER CONSIDERATIONS
Temporary Defensive Positions
Portfolio Turnover
FUND MANAGEMENT
Review this section for 18 The Investment Adviser
details on the people and 18 Portfolio Managers
organizations who oversee 19 Adviser's Prior Performance
the funds. 21 The Administrator and Distributor
SHAREHOLDER INFORMATION
Review this section for 22 Pricing of Fund Shares
details on how shares are 22 Purchase and Redemption of Shares
valued, how to purchase, 23 Distribution (12b-1) Fees
sell and exchange shares, 23 Dividends, Distributions and Taxes
related charges and payments
of dividends and
distributions.
FINANCIAL HIGHLIGHTS
Review this section for 24 Financial Highlights
details on selected
financial highlights of the
funds.
BACK COVER
Where to Learn More About USAllianz VIP Funds
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
USALLIANZ VIP FUNDS -- OVERVIEW
The USAllianz Variable Insurance Products Trust (the "USAllianz VIP Funds")
provides an investment vehicle for variable annuity contracts and variable
life insurance policies offered by the separate accounts of various life
insurance companies.
The following is a summary of certain key information about USAllianz VIP
Funds which offers five separate, diversified investment portfolios
(collectively, the "Funds" and each individually, a "Fund"). The "Risk/Return
Summary; Investment Objectives, Principal Investment Strategies and Related
Risks" describes each Fund's objectives, principal investment strategies,
principal investment risks and certain performance information. Please be
sure to read the complete descriptions of the Funds' risks before you invest.
The Funds are managed by Allianz of America, Inc. (the "Adviser").
3
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
GROWTH FUND
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INVESTMENT OBJECTIVE AND The Fund's investment objective is long-term growth of capital,
PRINCIPAL INVESTMENT which objective may not be changed without shareholder approval.
STRATEGIES In pursuit of its objective, the Fund normally invests at least
80% of its total assets in equity securities, which include
common stocks, preferred stocks and convertible securities of
U.S. issuers and foreign issuers whose securities are U.S.
dollar denominated and are traded on a U.S. securities market.
Although the Fund invests primarily in equity securities of
larger capitalization companies, the Fund is not limited to such
investments and will consider investing in securities of
companies with varying market capitalizations if they otherwise
meet the Adviser's criteria for purchases.
The Adviser uses a fundamental "bottom-up" approach to selecting
securities for investment. Factors considered may include
analysis of an issuer's financial condition, industry position,
management, growth prospects, earnings estimates and other
general economic and market conditions. Based upon the analysis
of such factors, the Adviser selects those securities which, in
the Adviser's judgment, will produce a return that exceeds the
average for companies included in the Standard and Poor's 500
Composite Stock Price Index (the "S&P 500(R) Index"). The
Adviser will consider selling those securities when it
determines that such securities would no longer meet its
criteria for purchase or when alternative investments become
more attractive.
(See "Other Considerations -- Temporary Defensive Positions".)
PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in
value of the investments held by the Fund. You may lose money by
investing in the Fund. The Fund faces the following general
risks:
- Market Risk: The values of stocks fluctuate in response to
the activities of individual companies and general stock
market and economic conditions. Stock prices may decline
over short or even extended periods. Stocks are more
volatile and riskier than some other forms of investment,
such as short-term, high-grade fixed income securities.
- Selection Risk: Selection risk is the chance that poor
security selection will cause the Fund to underperform other
funds with similar investment objectives.
- Capitalization Risk: To the extent the Fund invests
significantly in small or mid-capitalization companies, it
may have capitalization risk. These companies may present
additional risk because they have less predictable earnings,
more volatile share prices and less liquid securities than
large capitalization companies. These securities may
fluctuate in value more than those of larger, more
established companies and, as a group, may suffer more
severe price declines during periods of generally declining
stock prices.
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
GROWTH FUND
CONTINUED
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WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Investing for long-term goals, such as retirement
- Seeking to add a growth component to your portfolio
This Fund will not be appropriate for someone:
- Seeking safety of principal
- Investing for the short term or investing emergency
reserves
- Looking primarily for regular income
PERFORMANCE INFORMATION This Fund has less than one full calendar year of
operations; therefore, total return information is not
meaningful.
The net asset value ("NAV") of the Fund will fluctuate with
market conditions.
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
GLOBAL OPPORTUNITIES FUND
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INVESTMENT OBJECTIVE AND The Fund's investment objective is long-term growth of capital,
PRINCIPAL INVESTMENT which objective may not be changed without shareholder approval.
STRATEGIES In pursuit of its objective, the Fund normally invests at least
80% of its total assets in equity securities, which include
common stocks, preferred stocks, convertible securities,
warrants and rights of U.S. and foreign issuers. Generally, the
companies in which the Fund invests will be doing business in
one of the following seven industry sectors:
- Natural Resources. Natural resources, energy and
construction service industries, including companies that
provide basic resources for developing and industrialized
countries (such as energy resources, utilities, building
materials, forest and paper products, metals and
miscellaneous materials).
- Life Style. Innovative, solution-oriented companies in the
consumer goods industry (such as producers and providers of
appliances, household durable products, household products,
recreation and other consumer goods), food industry (such as
beverages, food and tobacco) and companies engaged in the
design, production and/or distribution of goods or services
in the leisure, tourism and merchandising industry.
- Financials. Forward-thinking, solution driven companies
providing financial-related services (such as banking,
insurance and financial services, as well as real estate,
wholesaling and international trade firms).
- High Technology. Companies that rely extensively on high
technology in their product range, development and/or
operations (such as data processing and reproduction
companies, electrical, electronics and electronic equipment
companies).
- Telemedia. Companies engaged in the development, production,
sale and/or distribution of media-related services (such as
broadcasting, publishing and internet companies) and
companies committed to the development of new information
technologies, contributing to progress being made in the
development of new communication infrastructures and
developing strategic communication solutions for the global
economy.
- Life Science. Global companies that offer innovative health
and personal care services and products (including
pharmaceutical and other health care companies).
- Transportation. Innovative and solution-driven companies
engaged in the business of transportation on either a
regional or global basis.
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
GLOBAL OPPORTUNITIES FUND
CONTINUED
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Although the Fund invests primarily in larger capitalization
companies, the Fund is not limited to such investments and
will consider investing in securities of companies with
varying market capitalizations if they otherwise meet the
Adviser's criteria for purchases. Similarly, while companies
whose principal trading markets are developed or
industrialized countries are likely to be the Fund's
principal investments, the Fund is not limited to such
investments and will consider investing in securities of
companies trading in emerging or developing markets. The
Fund may invest more than 25% of its total assets in a
single country.
The Adviser uses its own research, as well as input from its
affiliates around the world and other third parties to
identify attractive companies meeting the above sector
descriptions. The Adviser then uses a fundamental
"bottom-up" approach to selecting securities for investment.
Factors considered may include analysis of an issuer's
financial condition, industry position, management, growth
prospects, earnings estimates and other general economic and
market conditions. Based upon the analysis of such factors,
the Adviser selects those securities which, in the Adviser's
judgment, will produce a return that exceeds the average for
companies included in the MSCI World Equity Index. The Fund
may be overweighted or underweighted in a particular sector
or country relative to the MSCI World Equity Index based
upon the Adviser's judgment as to the relative prospects for
investments in particular sectors and countries. Because the
United States currently comprises approximately 50% of such
Index, the Fund will normally invest approximately the same
amount in U.S. securities.
The Adviser will consider selling securities when the
securities no longer meet the Adviser's criteria for
purchase or when alternative investments become more
attractive.
The Adviser does not intend to invest in markets where
property rights are not defined and supported by adequate
legal infrastructure. The Fund may trade forward foreign
currency contracts to hedge currency fluctuations of
underlying security positions when it is believed that a
foreign currency may suffer a decline against the U.S.
dollar.
(See "Other Considerations -- Temporary Defensive
Positions".)
PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes
in value of the investments held by the Fund. You may lose
money by investing in the Fund. The Fund faces the following
general risks:
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
GLOBAL OPPORTUNITIES FUND
CONTINUED
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- Market Risk: The values of stocks fluctuate in response to the
activities of individual companies and general stock market and
economic conditions. Stock prices may decline over short or
even extended periods. Stocks are more volatile and riskier
than some other forms of investment, such as short-term,
high-grade fixed-income securities.
- Foreign Risk: Foreign investments may be riskier than U.S.
investments. Such risks include, but are not limited to:
- lack of, or less stringent, uniform accounting, auditing
and financial reporting standards
- changes in currency rates
- nationalization, confiscation, difficulties enforcing
contracts, or foreign withholding/taxes
- political instability and diplomatic developments that
could adversely affect the Fund's investments
- less government oversight of foreign stock exchanges,
brokers and listed companies
- less liquidity due to lower trading volumes of foreign
markets which may increase price volatility
- foreign trading practices (including higher trading
commissions, higher custodial charges and delayed
settlements)
- less publicly available information about foreign companies
- negative effect on the value of the Fund's investments due
to fluctuations in the exchange rates between the U.S.
dollar and foreign currencies
- Selection Risk: Selection risk is the chance that poor security
selection will cause the Fund to underperform other funds with
similar investment objectives.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are an individual:
- Investing for long-term goals, such as retirement
- Seeking to add a global growth component to your portfolio
- Seeking capital appreciation and are willing to accept the
higher volatility associated with investing in foreign stocks
This Fund will not be appropriate for someone:
- Seeking safety of principal
- Investing for the short-term or investing emergency reserves
- Looking primarily for regular income
PERFORMANCE INFORMATION This Fund has less than one full calendar year of operations;
therefore, total return information is not meaningful.
The NAV of the Fund will fluctuate with market conditions.
</TABLE>
8
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
FIXED INCOME FUND
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INVESTMENT OBJECTIVE AND The Fund's investment objective is to maximize total return
PRINCIPAL INVESTMENT with secondary emphasis on income, which objective may not
STRATEGIES be changed without shareholder approval.
In pursuit of its objective, the Fund normally invests at
least 80% of its total assets in fixed income securities
rated within the four highest rating categories by a primary
credit rating agency or, if unrated, which are determined by
the Adviser to be of comparable quality. Fixed income
securities include U.S. Government securities, corporate
debt securities, U.S. dollar denominated securities of
foreign issuers (including corporate debt securities,
certificates of deposit and bankers' acceptances issued by
foreign banks, and obligations of foreign governments or
their subdivisions, agencies and instrumentalities,
international agencies and supranational entities), zero
coupon and pay-in-kind securities, asset-backed securities,
mortgage-backed securities (including stripped
mortgage-backed securities) and taxable and tax-exempt
municipal securities.
The Fund also may invest up to 20% of its total assets in
high yield securities (debt securities determined by a
primary credit rating agency to have a lower probability of
being paid and have a credit rating lower than BBB by
Standard & Poor's or Baa by Moody's Investor Services, Inc.
or, if unrated, which are deemed of comparable quality by
the Adviser).
The Adviser begins the portfolio management process by
reviewing current economic activity and forecasting how it
may change in the future. The Adviser uses this forecast to
allocate the Fund's assets across different market sectors
and maturities based on its view of the relative value of
each sector or maturity. The Adviser analyzes the risk
profile of the Fund's benchmark, the Lehman Brothers
Government/Corporate Bond Index, then adjusts the
portfolio's risk relative to the benchmark to enhance
long-term returns. Specific securities are included in the
portfolio based on a fundamental analysis of the securities'
cash flow risk and/or credit fundamentals.
Under normal conditions, the Fund intends to hold securities
(other than money market securities) with maturities
primarily between 1 and 30 years with an average maturity of
between 5 and 13 years, when weighted according to the
Fund's holdings. However, securities with any maturity are
eligible for purchase. The Adviser may sell a security if
its fundamental qualities deteriorate or to take advantage
of more attractive investment opportunities.
(See "Other Considerations -- Temporary Defensive
Positions".
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
FIXED INCOME FUND
CONTINUED
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PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in
value of the investments held by the Fund. You may lose money by
investing in the Fund. The Fund faces the following general
risks:
- Interest Rate Risk: Interest rate risk is the chance that
the value of the bonds the Fund holds will decline due to
rising interest rates. When interest rates rise, the price
of most bonds goes down. When interest rates go down, bond
prices go up. The price of a bond is also affected by its
maturity. Bonds with longer maturities generally have
greater sensitivity to changes in interest rates.
- Credit Risk: Credit risk is the chance that a bond issuer
will fail to repay interest and principal in a timely
manner, reducing the Fund's return. Also, an issuer may
suffer adverse changes in financial condition that could
lower the credit quality of a security, leading to greater
volatility in the price of the security and the Fund's
shares. A change in the quality rating of a bond can affect
the bond's liquidity and make it more difficult for the Fund
to sell.
- Prepayment Risk: The Fund's investments in mortgage-backed
and asset-backed securities are subject to the risk that the
principal amount of the underlying obligation may be repaid
prior to the bond's maturity date. Such repayments are
common when interest rates decline. When such a repayment
occurs, no additional interest will be paid on the
investment. Prepayment exposes the Fund to lower return upon
subsequent reinvestment of the principal.
- Security Quality Risk: The Fund has authority to invest up
to 20% of its total assets in high yield, high risk debt
securities. These lower quality securities have speculative
characteristics and are more volatile and are more
susceptible to credit risk than investment grade securities.
Because of their more precarious financial position, issuers
of high yield bonds may be more vulnerable to changes in the
economy or to interest rate changes that might affect their
ability to repay debt.
- Income Risk: Income risk is the chance that falling interest
rates will cause the Fund's income to decline. Income risk
is generally higher for short-term bonds.
- Selection Risk: Selection risk is the chance that poor
security selection will cause the Fund to underperform other
funds with similar investment objectives.
- Yield Curve Risk: This is the risk that changes in the shape
of the yield curve will affect the value of the Fund's
investments in income-producing or debt securities.
- Volatility Risk: This is the risk that the magnitude of the
changes in the shape of the yield curve will affect the
value of the Fund's investments in income-producing or debt
securities.
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
FIXED INCOME FUND
CONTINUED
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ADDITIONAL RISKS - Asset-backed securities involve the risk that such
securities may not have the benefit of a complete security
interest in the related collateral.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Seeking to add a monthly income component to your portfolio
- Willing to accept the risks of price and income fluctuations
- Wanting to add diversification to a portfolio invested
primarily in stocks
This Fund will not be appropriate for someone:
- Investing emergency reserves
- Seeking a stable share price
PERFORMANCE INFORMATION This Fund has less than one full calendar year of operations;
therefore, total return information is not meaningful.
The NAV of the Fund will fluctuate with market conditions.
</TABLE>
11
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
MONEY MARKET FUND
<TABLE>
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INVESTMENT OBJECTIVE AND The Fund's investment objective is current income consistent
PRINCIPAL INVESTMENT with stability of principal, which objective may not be changed
STRATEGIES without shareholder approval.
The Fund invests substantially all (but not less than 80%) of
its total assets in a diversified and liquid portfolio of high
quality, money market investments, including:
- U.S. Government securities;
- Certificates of deposits, time deposits, bankers'
acceptances and other short-term instruments issued by U.S.
or foreign banks;
- U.S. and foreign commercial paper and other short-term
corporate debt obligations, including those with floating
rate or variable rates of interest;
- Obligations issued or guaranteed by one or more foreign
governments or their agencies, including supranational
entities;
- Loan participation interests;
- Asset backed securities; and
- Repurchase agreements collateralized by the types of
securities described above.
The Fund is required to invest at least 95% of its total assets
in the securities of issuers with the highest credit rating,
with the remainder invested in securities with the
second-highest credit rating. The Fund is subject to certain
federal rules which require it to:
- maintain an average dollar-weighted portfolio maturity of 90
days or less
- buy individual securities that have remaining maturities of
13 months or less
- invest only in high-quality, dollar-denominated, short-term
obligations.
(See "Other Considerations -- Temporary Defensive Positions".)
PRINCIPAL INVESTMENT RISKS The Fund is not guaranteed to maintain a constant net asset
value of $1.00 per share, and it is possible to lose money by
investing in the Fund.
- Interest Rate Risk: This is the risk that changes in
interest rates will affect the value of the Fund's
investments in income-producing or debt securities.
Increases in interest rates may cause the value of the
Fund's investments to decline.
- Credit Risk: Although credit risk is very low because the
Fund only invests in high quality obligations, if an issuer
fails to pay interest or repay principal, the value of your
investment could decline.
- An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
</TABLE>
12
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
MONEY MARKET FUND
CONTINUED
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WHO MAY WANT TO INVEST? Consider investing in the Money Market Fund if you:
- Are seeking preservation of capital
- Have a low risk tolerance
The Money Market Fund will not be appropriate for anyone:
- Seeking high total returns
- Pursuing a long-term goal or investing for retirement
PERFORMANCE INFORMATION You can obtain the Fund's current 7-day yield by calling
1-800-542-5427.
The yield of the Fund will fluctuate with market conditions.
</TABLE>
13
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
DIVERSIFIED ASSETS FUND
<TABLE>
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INVESTMENT OBJECTIVE AND The Fund's investment objective is total return consistent with
PRINCIPAL INVESTMENT reduction of long-term volatility, which objective may not be
STRATEGIES changed without shareholder approval.
While the Fund normally invests approximately 65% of its total
assets in fixed income securities (which include investment
grade corporate bonds and U.S. Government securities), 25% in
equity securities and 10% in money market securities, the mix
may vary within ranges of 50-70% for fixed income securities,
20-40% for stocks and 5-15% for money market securities.
The Adviser uses a portfolio management team approach. In making
asset allocation decisions, the portfolio management team
evaluates forecasts for inflation, interest rates and long-term
corporate earnings growth. The team then examines the potential
effect of these factors on each asset group over a
one-to-three-year time period and compares its risk analysis to
a weighted index of 65% of the Lehman Brothers Intermediate
Government/Corporate Bond Index, 25% of the S&P 500(R) Index,
and 10% of the 90-day Treasury Bill. The team then selects
securities based on a "bottom-up" analysis in accordance with
the following criteria:
- Bonds. The Fund invests in fixed income securities including
(1) government and corporate bonds, (2) mortgage-backed
securities (including stripped mortgage-backed securities)
and (3) asset-backed securities. The Fund invests primarily
in bonds rated within the four highest long-term or two
highest short-term rating categories or comparable quality
unrated securities. The Fund may invest up to 20% of its
total assets in high yield debt securities. Under normal
conditions, the Fund intends to hold debt securities (other
than money market securities) with maturities between 1 and
10 years. However, securities with any maturity are eligible
for purchase. The Adviser begins the portfolio management
process by reviewing current economic activity and
forecasting how it may change in the future. The Adviser
uses this forecast to allocate the Fund's assets across
different market sectors and maturities based on its view of
the relative value of each sector or maturity.
</TABLE>
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INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
DIVERSIFIED ASSETS FUND
CONTINUED
<TABLE>
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- Stocks. The Fund invests in common stocks, preferred stocks
and convertible securities. The Fund may invest in both U.S.
issuers and foreign issuers whose securities are U.S. dollar
denominated and traded on a U.S. security market, and
invests primarily in equity securities of larger
capitalization companies. The Adviser uses a "bottom-up"
approach to selecting securities for investment. Based upon
the analysis of various factors, the Adviser selects those
securities which, in its judgment, will outperform the
average for the companies included in the S&P 500(R) Index.
- Money Market Instruments. The Fund will invest in
high-quality, U.S. dollar-denominated short-term
obligations, including commercial paper, asset-backed
securities, obligations of financial institutions and other
high-quality money market instruments issued by U.S. and
foreign issuers. These securities will be rated in one of
the two highest short-term rating categories of at least two
rating agencies or will be unrated securities of comparable
quality.
(See "Other Considerations -- Temporary Defensive Positions".)
PRINCIPAL INVESTMENT RISKS The price per share of the Fund will fluctuate with changes in
value of the investments held by the Fund. You may lose money by
investing in the Fund. The Fund faces the following general
risks:
- Market Risk: The values of stocks fluctuate in response to
the activities of individual companies and general stock
market and economic conditions. Stock prices may decline
over short or even extended periods. Stocks are more
volatile and riskier than some other forms of investment,
such as short-term, high-grade fixed income securities.
- Interest Rate Risk: Interest rate risk is the chance that
the value of the bonds the Fund holds will decline due to
rising interest rates. When interest rates rise, the price
of most bonds goes down. When interest rates go down, bond
prices go up. The price of a bond is also affected by its
maturity. Bonds with longer maturities generally have
greater sensitivity to changes in interest rates.
- Credit Risk: Credit risk is the chance that a bond issuer
will fail to repay interest and principal in a timely
manner, reducing the Fund's return. Also, an issuer may
suffer adverse changes in financial condition that could
lower the credit quality of a security, leading to greater
volatility in the price of the security and the Fund's
shares. A change in the quality rating of a bond can affect
the bond's liquidity and make it more difficult for the Fund
to sell.
</TABLE>
15
<PAGE> 17
INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
DIVERSIFIED ASSETS FUND
CONTINUED
<TABLE>
<S> <C> <C>
- Security Quality Risk: The Fund has authority to invest up
to 20% of its total assets in high yield, high risk debt
securities. These lower quality securities have speculative
characteristics and are more volatile and are more
susceptible to credit risk than investment grade securities.
Because of their more precarious financial position, issuers
of high yield bonds may be more vulnerable to changes in the
economy or to interest rate changes that might affect their
ability to repay debt.
- Selection Risk: Selection risk is the chance that poor
security selection will cause the Fund to underperform other
funds with similar investment objectives.
- Capitalization Risk: Securities of small and
mid-capitalization companies tend to be more volatile, have
less predictable earnings, and are less liquid than those of
large capitalization companies.
- Yield Curve Risk: This is the risk that changes in the shape
of the yield curve will affect the value of the Fund's
investments in income-producing or debt securities.
- Volatility Risk: This is the risk that the magnitude of the
changes in the shape of the yield curve will affect the
value of the Fund's investments in income-producing or debt
securities.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
- Investing for long-term goals, such as retirement
- Seeking regular monthly income
- Pursuing a balanced approach to investments in both growth-
and income-producing securities
This Fund will not be appropriate for someone:
- Pursuing an aggressive high growth investment strategy
- Seeking a stable share price
- Investing emergency reserves
PERFORMANCE INFORMATION This Fund has less than one full calendar year of operations;
therefore, total return information is not meaningful.
The NAV of the Fund will fluctuate with market conditions.
</TABLE>
16
<PAGE> 18
INVESTMENT OBJECTIVES, PRINCIPAL
RISK/RETURN SUMMARY INVESTMENT STRATEGIES AND RELATED RISKS
OTHER CONSIDERATIONS
<TABLE>
<S> <C>
TEMPORARY DEFENSIVE In order to meet liquidity needs or for temporary defensive
POSITIONS purposes, each Fund may hold investments, including
uninvested cash reserves, that are not part of its main
investment strategy. Each of the Growth Fund, Global
Opportunities Fund, Diversified Assets Fund and Fixed Income
Fund (the "Non-Money Market Funds") may invest up to 100% of
its total assets in money market instruments, including
short-term debt securities issued by the U.S. Government and
its agencies and instrumentalities, domestic bank
obligations, commercial paper or in repurchase agreements
secured by bank instruments (with regard to the Global
Opportunities Fund, such investments may include those of
foreign governments and companies). In addition, each
Non-Money Market Fund may hold equity securities which in
the Adviser's opinion are more conservative than the types
of securities in which the Fund typically invests. To the
extent the Funds are engaged in temporary or defensive
investments, a Fund will not be pursuing its investment
objective.
PORTFOLIO TURNOVER While the Funds do not engage in short-term trading, in some
cases in response to market conditions, a Fund's portfolio
turnover rate may exceed 100%. A higher rate of portfolio
turnover increases brokerage and other expenses, which must
be borne by the Fund and its shareholders and may adversely
affect the Fund's performance. High portfolio turnover also
may result in the realization of substantial net short-term
capital gains, which are taxable as ordinary income when
distributed to shareholders.
</TABLE>
17
<PAGE> 19
FUND MANAGEMENT
THE INVESTMENT ADVISER
Allianz of America, Inc. (the "Adviser") is the adviser for the Funds. The
Adviser, a registered investment adviser, was established in 1976 and as of
December 31, 1999 managed more than $21 billion in fixed income, equity and
real estate investments. The Adviser is a subsidiary of Allianz AG Holding
("Allianz AG"), one of the world's largest insurance and financial services
companies. Allianz AG is headquartered in Munich, Germany and has operations
in 68 countries. In North America, Allianz AG owns and operates Fireman's
Fund Insurance Company, Allianz Life Insurance Company of North America,
Jefferson Insurance Company, Allianz Insurance Company, Allianz Canada, and
Allianz Mexico. Through its portfolio management team, the Adviser makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Funds' investment programs.
For these advisory services, each Fund pays the Adviser a fee at the annual
rate shown below:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
NET ASSETS
---------------------
<S> <C>
Growth Fund .75%
Global Opportunities Fund .95%
Fixed Income Fund .50%
Money Market Fund .35%
Diversified Assets Fund .55%
</TABLE>
The Adviser may voluntarily waive a portion of its advisory fee and/or
reimburse expenses incurred by the Funds, and such waiver and/or
reimbursements may be discontinued at any time.
PORTFOLIO MANAGERS
The Adviser has several portfolio managers committed to the day-to-day
management of the Funds. Each portfolio manager uses a team approach to the
investment management of the Non-Money Market Funds and relies on analysis,
research and other information furnished by the team's experienced investment
professionals.
Fixed Income Investments: Gary Brown is responsible for the team of highly
trained investment professionals who manage the assets of the Fixed Income
Fund. He also leads the team responsible for the fixed income investments of
the Diversified Assets Fund and for the Money Market Fund. He is Senior
Managing Director, Fixed Income of the Adviser and has twenty-four years of
investment experience. Mr. Brown is currently responsible for directing the
management of the Adviser's fixed income investments. He has been with the
Adviser since 1991, after serving as Managing Director at CIGNA Investments
from 1986 to 1991, with responsibility for CIGNA's public taxable and
tax-exempt bond portfolios, as well as four fixed income mutual funds and
institutional client portfolios. His investment experience has covered all
fixed income securities, including governments, corporates, mortgages, high
yield, convertibles and various derivative products. Mr. Brown was a Vice
President with CIGNA from 1982 to 1986, managing public and private fixed
income investments for the insurance company portfolios, responsible for
asset and liability management and CIGNA's convertible securities portfolio.
Prior to joining CIGNA, he managed public bond and private placement
investments for INA Capital Advisors, Inc from 1979 to 1982, and was an
investment analyst with The Penn Mutual Life Insurance Company from 1975 to
1979. Mr. Brown received a B.S. and an M.B.A. from Drexel University.
18
<PAGE> 20
1940 Act. Also, REITs (particularly equity REITs) may be dependent upon
management skill and face risks of failing to obtain adequate financing on
favorable terms.
19
<PAGE> 21
FUND MANAGEMENT
PORTFOLIO MANAGERS
CONTINUED
Equity Investments: Ronald M. Clark, Senior Managing Director, leads the team
of highly trained investment professionals responsible for the day-to-day
management of the Growth Fund and the Global Opportunities Fund and for the
equity investments of the Diversified Assets Fund. Mr. Clark is also
responsible for directing the management of all equity investments of the
Adviser and has twenty-nine years of investment experience. He began his
career in 1972 at Mutual of New York as an investment analyst, and shortly
thereafter joined its subsidiary, North American Life and Casualty, which was
later renamed Allianz Life Insurance Company of North America, where he was
Chief Investment Officer from 1973 to 1980. Since 1980, Mr. Clark has been
with the Adviser. In addition to equity investments, his responsibilities
include membership on the Investment Policy Committee of Allianz worldwide
and the Finance Committee of the Adviser. In addition, he provides senior
level oversight of real estate investments and holding company corporate
finance activities. He is a graduate of the University of Wisconsin, with an
undergraduate degree in Industrial Engineering, and masters in Finance and
Real Estate.
The Statement of Additional Information (SAI) has more detailed information
about the Adviser and other service providers.
ADVISER'S PRIOR PERFORMANCE
Each of the Growth Fund, Fixed Income Fund, Money Market Fund and Diversified
Assets Fund is substantially similar to other pooled accounts advised by the
Adviser. The performance information shown below is the performance of
unregistered master trust portfolios managed by the Adviser for tax-exempt
investors. Each master trust portfolio has investment objectives, policies,
styles and strategies substantially similar to ones employed by the
corresponding Fund. Each master trust portfolio is not subject to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Funds by the Investment Company Act of 1940 and
Subchapter M of the Internal Revenue Code. Consequently, the performance of
each master trust portfolio may have been adversely affected if it had been
regulated as an investment company under the federal securities laws.
Although this performance reflects the fees and expenses of the master trust
portfolios, this performance HAS NOT BEEN adjusted to reflect the fees and
expenses which will apply to the Funds. Had such performance been adjusted
for such fees and expenses, the performance results would have been lower.
The information does not represent the Funds' performance, as each, nor is it
indicative of the Funds' future performance. The performance was calculated
in accordance with recommended standards of the Association for Investment
Management and Research (AIMR), retroactively applied to all time periods.
Investment results were not calculated pursuant to the methodology
established by the Securities and Exchange Commission that will be used to
calculate the Funds' performance results. For information concerning the
Funds' performance from inception through December 31, 1999, see "Funds:
Average Annual Rates of Return for Periods Ending December 31, 1999" below.
19
<PAGE> 22
FUND MANAGEMENT
ADVISER'S PRIOR PERFORMANCE
CONTINUED
MASTER TRUST PORTFOLIO ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
MASTER TRUST PORTFOLIO 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
EQUITY 4.19% 48.14% -3.06% 3.45% -1.95% 33.73% 22.50% 33.94% 27.55% 25.88%
------------------------------------------------------------------------------
FIXED INCOME N/A N/A N/A N/A -3.16% 20.47% 3.45% 10.48% 9.84% -2.47%
------------------------------------------------------------------------------
MONEY MARKET N/A N/A 4.26% 3.54% 3.98% 6.10% 5.50% 5.67% 5.49% 5.39%
------------------------------------------------------------------------------
DIVERSIFIED ASSETS N/A N/A 4.19% 5.49% -1.65% 20.66% 10.36% 15.91% 13.82% 9.96%
------------------------------------------------------------------------------------------------------
</TABLE>
MASTER TRUST PORTFOLIO
AVERAGE ANNUAL RATES OF RETURN FOR PERIODS ENDING
DECEMBER 31, 1999
The table below provides an indication of the risks of an investment in the
Funds by showing performance of the master trust portfolios, as described
above, as compared to a broad-based securities index and in the case of the
diversified assets master trust portfolio, additionally to an index created
by the Adviser.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR 5 YEARS 7 YEARS 10 YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------
EQUITY MASTER TRUST PORTFOLIO 25.88% 28.64% 20.01% 18.29% 18.94% 6/1/89*
----------------------------------------------------------------
S&P 500(R) INDEX 21.04% 28.55% 21.52% 18.21% 18.41%
--------------------------------------------------------------------------------------------------------------
FIXED INCOME MASTER TRUST PORTFOLIO -2.47% 8.08% 6.10% NA 6.34% 4/1/93*
----------------------------------------------------------------
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX -2.15% 7.60% 6.42% NA 5.95%
--------------------------------------------------------------------------------------------------------------
MONEY MARKET MASTER TRUST PORTFOLIO 5.39% 5.63% 5.16% NA 4.99% 1/1/92*
----------------------------------------------------------------
3 MONTH TREASURY BILL 4.96% 5.28% 4.86% NA 4.70%
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED ASSETS MASTER TRUST PORTFOLIO 9.96% 14.07% 10.50% NA 9.64% 1/1/92*
----------------------------------------------------------------
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX 0.39% 7.09% 5.99% NA 6.13%
----------------------------------------------------------------
DIVERSIFIED ASSETS INDEX** 5.81% 12.13% 9.76% NA 9.37%
--------------------------------------------------------------------------------------------------------------
* Commencement of Operations
** An index created by the Adviser consisting of several securities market indices including 65% of the Lehman
Brothers Intermediate Government/Corporate Bond Index, 25% of the S&P 500H Index and 10% of the 90-day
Treasury Bill.
</TABLE>
20
<PAGE> 23
FUND MANAGEMENT
FUNDS:
AVERAGE ANNUAL RATES OF RETURN FOR PERIOD ENDING
DECEMBER 31, 1999
The table below shows the performance of the Growth Fund, Fixed Income and
the Diversified Assets Fund for the period from inception through December
31, 1999, as compared to a broad-based securities index and in the case of
the Diversified Assets Fund, additionally to an index created by the Adviser.
The Global Opportunities Fund and the Money Market Fund were not in operation
during such period.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
SINCE INCEPTION
(11/9/99)
<S> <C>
GROWTH FUND 8.52%
S&P 500(R) INDEX 6.91%
FIXED INCOME FUND -1.79%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -1.23%
DIVERSIFIED ASSETS FUND 2.81%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -0.58%
DIVERSIFIED ASSETS INDEX* 1.41%
* An index created by the Adviser consisting of several securities market
indices including 65% of the Lehman Brothers Intermediate
Government/Corporate Bond Index, 25% of the S&P 500(R) Index and 10% of the
90-day Treasury Bill.
The indices above do not reflect the deduction of fees associated with a
mutual fund, such as investment management and fund accounting fees. Each
of the Fund's performance reflects the deduction of fees for those
services.
The total return of each Fund does not reflect the effect of any insurance
charges or the annual maintenance fee. Such charges and expenses would
reduce the performance quoted. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. The investment return and net asset value will fluctuate, so that
investors' shares, when redeemed, may be worth more or less than the
original cost.
</TABLE>
THE ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Ohio, Inc. ("BISYS"), whose address is 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as the Funds' administrator, transfer agent
and fund accountant. Administrative services of BISYS include providing
office space, equipment and clerical personnel to the Funds and supervising
custodial, auditing, valuation, bookkeeping, legal and dividend disbursing
services.
BISYS Fund Services Limited Partnership serves as the distributor of the
Funds' shares (the "Distributor"). The Distributor may provide financial
assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
21
<PAGE> 24
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NET ASSET VALUE IS
CALCULATED
NAV is calculated by adding
the total value of a Fund's
investments and other
assets, subtracting its
liabilities and then
dividing that figure by the
number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
--------------------
Number of Shares
Outstanding
---------------------------
Per share NAV for each Fund, other than the
Money Market Fund, is determined and its
shares are priced at the close of regular
trading on the New York Stock Exchange (the
"NYSE"), normally at 4:00 p.m. Eastern time,
on days the NYSE is open.
The securities (other than short-term debt
securities) of the Funds, except the Money
Market Fund, are generally valued at current
market prices. If market quotations are not
available, prices will be based on fair value
as determined in good faith by or at the
direction of the Funds' Trustees.
After the pricing of a foreign security has
been established, if an event occurs which
would likely cause the value to change, the
value of the foreign security may be priced at
fair value as determined in good faith by or
at the direction of the Funds' Trustees. The
effect of using fair value pricing is that the
Fund's NAV will be subject to the judgment of
the Board of Trustees or its designees instead
of being determined by the market. In
addition, the foreign securities acquired by a
Fund may be valued in foreign markets on days
when the Fund's NAV is not calculated. In such
cases, the NAV of a Fund may be significantly
affected on days when investors cannot buy or
sell shares.
MONEY MARKET FUND
The Money Market Fund's NAV, the offering price, is expected to be constant
at $1.00 per share although this value is not guaranteed. The NAV is
determined each day at 1:00 p.m. Eastern time, on days the New York Stock
Exchange (the "NYSE") is open. The Money Market Fund values its securities at
its amortized cost. The amortized cost method values a portfolio security
initially at its cost on the date of the purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal
amount due at maturity and initial cost.
PURCHASE AND REDEMPTION OF SHARES
Investors may not purchase or redeem shares of the Funds directly, but only
through the variable annuity contracts and variable life insurance policies
offered through the separate accounts of participating insurance companies.
You should refer to the prospectus of the participating insurance company's
separate account for information on how to purchase a variable annuity
contract or variable life insurance policy, how to select specific USAllianz
VIP Funds as investment options for your contract or policy and how to redeem
monies from the Funds.
The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders.
22
<PAGE> 25
SHAREHOLDER INFORMATION
PURCHASE AND REDEMPTION OF SHARES
CONTINUED
Orders for the purchase and redemption of shares of a Fund received before
the NYSE closes are effected at the net asset value per share determined as
of the close of trading on the NYSE (generally 4:00 p.m. Eastern time) that
day. Orders received after the NYSE closes are effected at the next
calculated net asset value. Payment for redemption will be made by the Funds
within 7 days after the request is received.
The Funds may suspend the right of redemption under certain extraordinary
circumstances in accordance with the rules of the Securities and Exchange
Commission. The Funds do not assess any fees when they sell or redeem their
shares.
Each Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will
consist of securities equal in market value to your shares. When you convert
these securities to cash, you will pay brokerage charges.
DISTRIBUTION (12b-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Funds' shares. 12b-1 fees are paid from Fund assets on an
ongoing basis. Over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Each Fund pays a 12b-1 fee of up to 0.25% of its average daily net assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives is paid out, less expenses, in the form of
dividends to its shareholders. Shares begin accruing dividends on the day
they are purchased. Income dividends on the Growth Fund and Global
Opportunities Fund are usually paid semi-annually. Income dividends on the
Money Market Fund, Diversified Assets Fund and Fixed Income Fund are usually
paid monthly. Capital gains for all Funds are distributed at least annually.
All dividends and capital gain distributions will be automatically reinvested
in additional shares of a Fund at the net asset value of such shares on the
payment date.
Each Fund is treated as a separate corporate entity for tax purposes. Each
Fund intends to elect to be treated as a regulated investment company and
each Fund intends to qualify for such treatment for each taxable year under
Subchapter M of the Internal Revenue Code of 1986, as amended. Provided that
a Fund and a separate account investing in the Fund satisfy applicable tax
requirements, any distributions from the Fund to the separate account will be
exempt from current federal income taxation to the extent that such
distributions accumulate in a variable annuity contract or a variable life
insurance contract.
Persons investing in variable annuity contracts or variable life insurance
contracts should refer to the prospectuses with respect to such contracts for
further information regarding the tax treatment of the contracts and the
separate accounts in which the contracts are invested.
23
<PAGE> 26
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
financial performance of the Growth Fund, Fixed Income Fund and the
Diversified Assets Fund for the period ended December 31, 1999. The Global
Opportunities Fund and the Money Market Fund were not in operation during
such period. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that you would have
earned (or lost) on an investment in the indicated Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by KPMG LLP, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999 (A)
GROWTH FUND FIXED INCOME FUND DIVERSIFIED ASSETS FUND
----------- ----------------- -----------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $10.00 $ 10.00
-----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net Investment Income -- 0.08 0.05
Net realized and unrealized gain (loss) on
investments 0.85 (0.26) 0.23
-----------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.85 (0.18) 0.28
-----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Dividends (from Net Investment Income) --* (0.08) (0.05)
-----------------------------------------------------------------------------------------------------------
Total Distributions to Shareholders -- (0.08) (0.05)
-----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.85 $ 9.74 $ 10.23
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Total Return 8.52%** (1.79%)** 2.81%**
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (000) $11,214 $9,908 $10,371
Net investment income (loss) before waivers/
reimbursements (2.89%)*** 2.69%*** 0.75%***
Net investment income net of
waivers/ reimbursements 0.12%*** 5.71%*** 3.56%***
Expenses before waivers/ reimbursements 3.90%*** 3.77%*** 3.80%***
Expenses net of waivers/reimbursements 0.90%*** 0.75%*** 1.00%***
Portfolio turnover rate 5.27% 55.81% 52.17%
</TABLE>
(a) From commencement of operations on November 9, 1999 to December 31,
1999.
* Distributions from net investment income were less than one cent per
share.
** Total return for periods less than one year is not annualized.
*** Annualized.
24
<PAGE> 27
This Prospectus is intended for use only when accompanied by a separate account
prospectus.
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS (REPORTS):
Each Fund's annual and semi-annual reports to shareholders contain additional
information about the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including their
respective operations and investment policies. It is incorporated by reference
and is legally considered a part of this Prospectus.
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the USAllianz VIP Funds by contacting a broker or
bank that sells the Funds. Or contact the Funds at:
USALLIANZ VIP FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-877-833-7113
E-MAIL:
[email protected]
INTERNET:
HTTP://WWW.USALLIANZVIPFUNDS.COM
You can review and copy the Funds' Reports and the SAI at the Public Reference
Room of the Securities and Exchange Commission. You can get text only copies:
- for a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-0102, or calling 1-202-942-8090, or by electronic
request, by e-mailing the SEC at the following e-mail address:
[email protected].
- at no charge from the EDGAR Database on the Commission's Internet site at
http://www.sec.gov.
Investment Company Act file no. 811-9491.
<PAGE> 28
GROWTH FUND
GLOBAL OPPORTUNITIES FUND
FIXED INCOME FUND
MONEY MARKET FUND
DIVERSIFIED ASSETS FUND
Each a Fund of
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST (THE "USALLIANZ VIP FUNDS")
Statement of Additional Information
May 1, 2000
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Prospectus for USAllianz VIP Funds dated
May 1, 2000, which may be supplemented from time to time. This Statement of
Additional Information is incorporated by reference in its entirety into the
Prospectus. Copies of the Prospectus may be obtained without charge, upon
request, by writing USAllianz VIP Funds at 3435 Stelzer Road, Columbus, Ohio
43219, or by calling toll free (877) 833-7113.
<PAGE> 29
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES................................................. B-3
The Funds ................................................................................ B-3
Additional Information on Portfolio Instruments........................................... B-6
Investment Restrictions................................................................... B-19
Portfolio Turnover........................................................................ B-21
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................................. B-21
NET ASSET VALUE................................................................................ B-21
Valuation of the Funds.................................................................... B-21
MANAGEMENT OF THE TRUST........................................................................ B-23
Trustees and Officers..................................................................... B-23
The Adviser............................................................................... B-27
Portfolio Transactions.................................................................... B-28
Administrator, Transfer Agent and Fund Accountant......................................... B-29
Distributor............................................................................... B-30
Custodian................................................................................. B-32
Independent Auditors...................................................................... B-32
Legal Counsel............................................................................. B-32
Codes of Ethics........................................................................... B-32
ADDITIONAL INFORMATION......................................................................... B-33
Description of Shares..................................................................... B-33
Vote of a Majority of the Outstanding Shares.............................................. B-33
Additional Tax Information................................................................ B-33
Additional Tax Information Concerning the Global Opportunities Fund....................... B-36
Performance Information................................................................... B-37
Yields of the Funds....................................................................... B-38
Calculation of Total Return............................................................... B-38
Performance Comparisons................................................................... B-39
Miscellaneous............................................................................. B-39
Financial Statements...................................................................... B-40
APPENDIX....................................................................................... B-41
</TABLE>
2
<PAGE> 30
STATEMENT OF ADDITIONAL INFORMATION
USALLIANZ VIP FUNDS
USAllianz Variable Insurance Products Trust (the "Trust" or "USAllianz
VIP Funds") is an open-end, management company organized in July 1999 as a
Delaware business trust comprised of five separate and diversified investment
portfolios (collectively, the "Funds" and each individually, a "Fund"), each
with a different investment objective. The Trust currently offers four variable
net asset value funds: the Growth Fund, the Global Opportunities Fund, the Fixed
Income Fund, and the Diversified Assets Fund. The Trust also offers the Money
Market Fund.
The Trust is established exclusively for the purpose of providing an
investment vehicle for variable annuity contracts and variable life insurance
policies offered by the separate accounts of various life insurance companies
(the "Participating Insurance Companies"). Shares of the Trust are not offered
to the general public but solely to such separate accounts (the "Separate
Accounts").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Trust
described above. Capitalized terms not defined herein are defined in the
Prospectus. No investment in shares of a Fund should be made without first
reading the Trust's Prospectus.
INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES
The investment objectives of each Fund are fundamental and may not be
changed without the vote of the Fund's shareholders.
THE FUNDS
GROWTH FUND. The Fund pursues its objective of long-term growth of capital by
investing primarily in a diversified portfolio of publicly traded common and
preferred stocks and securities convertible into or exchangeable for common
stock (see "Convertible Securities"). The Fund expects to invest primarily in
securities of U.S.-based companies, but it may also invest in securities of
non-U.S. companies, generally through American Depository Receipts ("ADRs").
(See "Depositary Receipts"). The Fund may invest without limit, hold uninvested
cash reserves or invest in debt instruments for temporary defensive purposes
when the Adviser has determined that abnormal market or economic conditions so
warrant. These debt obligations may include U.S. Government securities;
certificates of deposit, bankers' acceptances and other short-term debt
obligations of banks with total assets of at least $100,000,000; debt
obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments); variable and floating rate demand and
master demand notes; commercial paper; and repurchase agreements with respect to
securities in which the Fund is authorized to invest. (See "Bank Obligations",
"Government Obligations", "Commercial Paper", "Corporate Debt Securities",
"Repurchase Agreements" and "Variable and Floating Rate Demand and Master Demand
Notes"). Although the Fund's investments in such debt securities and in
convertible and preferred stock will generally be rated A, A-1, or better by
Standard & Poor's Corporation ("S&P") or A, Prime-1 or better by Moody's
Investors Service, Inc. ("Moody's"), or deemed of comparable quality by the
Adviser, the Fund is authorized to invest up to 15% of its total assets in
securities rated as low as BBB by S&P or Baa by Moody's, or deemed of comparable
quality by the Adviser. Securities rated BBB or Baa, or deemed equivalent to
such securities, may have speculative characteristics. If any security held by
the Fund is downgraded below BBB/Baa (or so deemed by the Adviser), the
securities will generally be sold unless it is determined that
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such sale is not in the best interest of the Fund. The Fund will invest in no
securities rated below BBB or Baa. In addition, the Fund may enter into stock
index futures contracts, options on securities and options on futures contracts
to a limited extent (see "Future Contracts", and "Option Trading"). The Fund has
no intention to utilize options and futures in the near future and will
supplement its prospectus disclosure in the event it employs such investment
practices. The Fund may also invest in investment companies and real estate
investment trusts ("REITs") and lend portfolio securities (See "Securities of
Other Investment Companies", "Lending of Portfolio securities", and "Real Estate
Investment Trusts").
GLOBAL OPPORTUNITIES FUND. The Fund pursues its objective of long-term growth of
capital by investing, under normal circumstances, at least 80% of its total
assets in equity securities, including convertible securities of U.S. and
foreign issuers (see "Convertible Securities"). In addition, the Fund may enter
into stock index futures contracts, options on securities, options on futures
contracts and forward foreign currency exchange contracts to a limited extent
(see "Futures Contracts", "Options Trading", "Foreign Currency Options and
Futures Transactions", and "Forward Foreign Currency Exchange Contracts"). The
Fund has no intention to utilize options and futures in the near future and will
supplement its prospectus disclosure in the event it employs such investment
practice. The balance of the Fund's assets may be invested in investment grade
debt obligations issued by domestic and foreign companies, banks and governments
including institutions such as the World Bank (known as "Supranational Agency
Bonds"). For temporary defensive purposes when the Adviser has determined that
abnormal market or economic conditions so warrant, the Fund may invest without
limit in debt instruments of the same types, and subject to the same conditions,
as the Growth Fund under such circumstances. The Fund may also invest without
limitation in debt securities of foreign companies, banks and governments during
such abnormal market or economic conditions.
FIXED INCOME FUND. The Fund pursues its objective of maximizing total return
with secondary emphasis on income by investing in a diversified portfolio
consisting primarily of investment grade fixed rate debt obligations, including
U.S. government securities. Under normal market conditions, at least 80% of the
Fund's total assets will be invested in: obligations of the U.S. government, its
agencies and instrumentalities; corporate bonds of U.S. issuers; mortgage-backed
securities issued by U.S. government agencies and other asset backed securities
(see " Government Obligations", "Mortgage Related Securities" and "Corporate
Debt Securities").
The Fund also has authority to invest in other types of securities,
including preferred stocks, securities convertible into common stock,
dollar-denominated obligations of non-U.S. issuers, various types of
asset-backed securities, taxable and tax-exempt municipal bonds and money market
instruments (see "Convertible Securities" and "Foreign Investment"). The Fund
may also invest in income-producing securities issued by REITs and Guaranteed
Investment Contracts ("GICs") (see "Real Estate Investment Trusts" and
"Guaranteed Investment Contracts"). The Fund may engage in transactions in
covered options and interest-rate futures contracts in order to lengthen or
shorten the average maturity of its portfolio. (see "Futures Contracts", and
"Option Trading"). The Fund expects to maintain a dollar-weighted average
portfolio maturity of between 5 and 13 years.
At least 80% of the Fund's total assets will be invested in securities
rated Baa or better by Moody's or BBB or better by S&P or, if unrated, deemed of
comparable quality by the Adviser. If the rating of a security held by the Fund
is reduced, the Adviser is not required to sell the security but will do so if
and when the Adviser believes the sale is in the best interests of the Fund. Up
to 20% of the Fund's total assets may be invested in securities rated below BBB
by S&P or Baa by Moody's (or, if unrated, deemed of comparable quality by the
Adviser) at the time of purchase by the Fund. See the Appendix for a description
of such lower ratings and "Corporate Debt Securities" for a discussion of risks
posed by lower rated securities. The Fund may invest, for temporary defensive
purposes, in short term debt obligations of the foregoing as well as bank
obligations, commercial paper and repurchase
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agreements (see "Bank Obligations", "Commercial Paper" and "Repurchase
Agreements"). The Fund may also invest in other investment companies;
when-issued and delayed delivery securities, forward foreign currency exchange
contracts, and restricted securities. (see "Securities of Other Investment
Companies", and When-Issued and Delayed Delivery Securities", "Forward Foreign
Currency Exchange Contracts", and "Restricted Securities"). The Fund has
authority to lend its portfolio securities (see "Lending of Portfolio
Securities").
MONEY MARKET FUND. The Fund pursues its objective of current income consistent
with stability of principal by investing in a broad range of high quality,
short-term, money market instruments that have remaining maturities not
exceeding 397 days. The Fund is required to maintain a dollar-weighted average
portfolio maturity no greater than 90 days. The Fund's investments may include
any investments permitted under federal rules governing money market funds,
including: U.S. Government securities; bank obligations; commercial paper,
corporate debt securities and variable rate demand notes (see "Corporate Debt
Securities", "Repurchase Agreements", and "Variable and Floating Rate Demand and
Master Demand Notes").
The Adviser selects only those U.S. dollar-denominated debt instruments
that meet the high quality and credit risk standards established by the Board of
Trustees and consistent with Federal requirements applicable to money market
funds. In accordance with such requirements, the Fund will purchase securities
that are rated within the top two rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
rated the security, by that NRSRO, or if not rated, the securities are deemed of
comparable quality by the Adviser pursuant to standards adopted by the Board of
Trustees. Corporate debt securities (bonds, debentures, notes and other similar
debt instruments) in which the Fund may invest have 397 days or less to maturity
and are rated AA or better by S&P or Aa or better by Moody's. The Fund will
invest no more than 5% of its total assets in debt securities which are rated
below the top rating category or, if unrated, are of comparable investment
quality as determined by the Adviser.
The Fund may also invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies (see "Securities of Other Investment
Companies"). The Fund may also invest in when issued and delayed delivery
securities and lend its portfolio securities (see "When Issued and Delayed
Delivery Securities" and "Lending of Portfolio Securities").
DIVERSIFIED ASSETS FUND. The Fund pursues its objective through asset allocation
and security selection by investing in a diversified portfolio of bonds, stocks
and money market securities of U.S. and foreign issuers. The Adviser will seek
to allocate on average about 65% of the Fund's total assets to bonds, 25% to
stocks and 10% to money market securities.
o BONDS. The Fund invests in fixed income securities including (1) government
and corporate bonds, (2) mortgage-backed securities and (3) asset-backed
securities. The Fund invests primarily in bonds rated within the four
highest long-term or two highest short-term rating categories or comparable
quality unrated securities. The Fund may invest up to 20% of its total
assets in high yield debt securities although it does not presently intend
to do so. Under normal conditions, the Fund intends to hold securities with
maturities between 1 and 10 years. The Adviser begins the portfolio
management process by reviewing current economic activity and forecasting
how it may change in the future. The Adviser uses this forecast to allocate
the Fund's assets across different market sectors and maturities based on
its view of the relative value of each sector or maturity.
o STOCKS. The Fund invests in common stocks, preferred stocks and convertible
securities. The Fund may invest in both U.S. issuers and foreign issuers
whose securities are U.S. dollar denominated and
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traded on an U.S. security market, and invests primarily in equity
securities of larger capitalization companies. The Adviser uses a
"bottom-up" approach to selecting securities for investment. Based upon the
analysis of various factors, the Adviser selects those securities which in
its judgment will outperform the average for the companies included in the
S&P 500(R) Index.
o MONEY MARKET INSTRUMENTS. The Fund will invest in high-quality, U.S. dollar
denominated short-term obligations, including commercial paper,
asset-backed securities, obligations of financial institutions and other
high-quality money market instruments issued by U.S. and foreign issuers.
These securities will be rated in the two highest short-term rating
categories of at least two rating agencies or will be unrated securities of
comparable quality.
The Fund seeks to exceed the total return of a blended benchmark consisting of
65% of the Lehman Brothers Intermediate Government/Corporate Index, 25% of the
S&P 500(R) Index and 10% of the 90-day Treasury Bill. The Fund typically sells
securities when the Adviser determines that such securities would no longer meet
its criteria for purchase or when alternative investments become more
attractive.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objectives and
policies of each Fund of the Trust as set forth above and in the Prospectus for
the Trust.
BANK OBLIGATIONS (ALL FUNDS)
Each of the Funds may invest in bank obligations consisting of bankers'
acceptances, certificates of deposit and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity. Bankers' acceptances
invested in by the Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment, capital, surplus and undivided profits in
excess of $100,000,000 (as of the date of their most recently published
financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
and time deposits will be those of domestic and foreign banks and savings and
loan associations if (a) at the time of investment, the depository or
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
Each of the Funds may also invest in Eurodollar certificates of deposit
("Euro CDs"), which are U.S. dollar-denominated certificates of deposit issued
by offices of foreign and domestic banks located outside the United States;
Yankee certificates of deposit ("Yankee CDs") which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States; Eurodollar time deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or foreign bank;
and Canadian time deposits, which are basically the same as ETDs, except they
are issued by Canadian offices of major Canadian banks.
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COMMERCIAL PAPER (ALL FUNDS)
Commercial paper consists of unsecured promissory notes issued by
corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than 9
months and fixed rates of return.
The Global Opportunities Fund, Growth Fund, Diversified Assets Fund and
Fixed Income Fund may invest in commercial paper rated in any rating category or
not rated by an NRSRO. In general, investment in lower-rated instruments is more
risky than investment in instruments in higher-rated categories. For a
description of the rating symbols of each NRSRO, see the Appendix. Each Fund may
also invest in Canadian commercial paper, which is commercial paper issued by a
Canadian corporation and Europaper, which is commercial paper issued by a
European-based corporation.
VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND NOTES (ALL FUNDS)
The Funds may, from time to time, buy variable rate demand notes issued
by corporations, bank holding companies and financial institutions and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity in the 5 to
20 year range but carry with them the right of the holder to put the securities
to a remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities is
backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Ordinarily, the remarketing agent will adjust the interest rate every
seven days (or at other intervals corresponding to the notice period for the
put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity
Variable amount master demand notes in which each Fund may invest are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. Although there is
no secondary market in the notes, a Fund may demand payment of principal and
accrued interest at any time. While the notes are not rated by credit rating
agencies, issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial and other business concerns) must satisfy the
same criteria set forth above for commercial paper. The Adviser will consider
the earning power, cash flow, and other liquidity ratios of such notes and will
continuously monitor the financial status and ability to make payment on demand.
In determining dollar average maturity, a variable amount master demand note
will be deemed to have a maturity equal to the longer of the period of time
remaining until the next interest rate adjustment or the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
GUARANTEED INVESTMENT CONTRACTS (FIXED INCOME FUND AND DIVERSIFIED ASSETS FUND)
The Fixed Income Fund and Diversified Assets Fund may invest in GICs.
In determining average portfolio maturity, GICs will be deemed to have a
maturity equal to the period of time remaining until the next readjustment of
the guaranteed interest rate.
DEPOSITARY RECEIPTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
For many foreign securities, U.S. dollar-denominated ADRs, which are
traded in the United States on exchanges or over-the-counter, are issued by
domestic banks. ADRs represent an interest in the securities of a foreign issuer
deposited in a domestic bank or a correspondent bank. ADRs do not eliminate all
of the risk inherent in investing in the securities of foreign issuers. However,
by investing in
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ADRs rather than directly in foreign issuers' stock, a Fund can avoid currency
risks during the settlement period for either purchases or sales. In general,
there is a large liquid market in the United States for many ADRs. The Global
Opportunities Fund may also invest in EDRs and GDRs which are receipts
evidencing an arrangement with European and other banks similar to that for ADRs
and are designed for use in European and other securities markets. EDRs and GDRs
are not necessarily denominated in the currency of the underlying security.
Certain depositary receipts, typically those categorized as
unsponsored, require the holders to bear most of the costs of such facilities
while issuers of sponsored facilities normally pay more of the costs. The
depository of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders with respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
SECURITIES OF OTHER INVESTMENT COMPANIES (ALL FUNDS)
Each Fund may invest in securities issued by other investment
companies, including S&P Depositary Receipts ("SPDRs") which represent ownership
in a unit investment trust that holds a portfolio of common stocks designed to
track the price, performance and dividend yield of the S&P(R) 500 Index. Each of
the Funds currently intends to limit its investments in other investment
companies so that, as determined immediately after a securities purchase is
made: (a) not more than 5% of the value of its total assets will be invested in
the securities of any one investment company; (b) not more than 10% of the value
of its total assets will be invested in the aggregate in securities of
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by any of the Funds; and (d)
not more than 10% of the outstanding voting stock of any one investment company
will be owned in the aggregate by the Funds. As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of that company's expenses, including advisory fees. These expenses
would be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations. Investment companies in which a
Fund may invest may also impose a sales or distribution charge in connection
with the purchase or redemption of their shares and other types of commissions
or charges. Such charges will be payable by the Funds and, therefore, will be
borne indirectly by shareholders.
GOVERNMENT OBLIGATIONS (ALL FUNDS)
Each of the Funds may invest in obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, including bills, notes and
bonds issued by the U.S. Treasury, as well as "stripped" U.S. Treasury
obligations ("Stripped Treasury Obligations") such as Treasury receipts issued
by the U.S. Treasury representing either future interest or principal payments.
Stripped securities are issued at a discount to their "face value" and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors.
Obligations of certain agencies and instrumentalities of the U.S.
government, such as the Government National Mortgage Association ("GNMA"), are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of Fannie Mae ("FNMA"), are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Student Loan Marketing
Association ("SLMA"), are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks or the Federal Home Loan Mortgage Corporation
("FHLMC"), are supported only by the credit of the instrumentality. No assurance
can be given that the U.S. government would provide financial support to U.S.
government-sponsored agencies or instrumentalities, such as FNMA, SLMA, or the
FHLMC,
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since it is not obligated to do so by law. These agencies or instrumentalities
are supported by the issuer's right to borrow specific amounts from the U.S.
Treasury, the discretionary authority of the U.S. government to purchase certain
obligations from such agencies or instrumentalities, or the credit of the agency
or instrumentality.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES (ALL FUNDS)
Each Fund may purchase securities on a "when-issued" or
"delayed-delivery" basis. The Funds will engage in when-issued and
delayed-delivery transactions only for the purpose of acquiring portfolio
securities consistent with their investment objectives and policies, not for
investment leverage, although such transactions represent a form of leveraging.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield and thereby involve risk that the
yield obtained in the transaction will be less than those available in the
market when the delivery takes place. A Fund will not pay for such securities or
start earning interest on them until they are received. When a Fund agrees to
purchase securities on a "when-issued" or "delayed-delivery" basis, the Trust's
Custodian will set aside cash or liquid securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy the purchase commitment, and in such case, a
Fund may be required subsequently to place additional assets in the separate
account in order to assure that the value of the account remains equal to the
amount of a Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, because a
Fund will set aside cash or liquid securities to satisfy its purchase
commitments in the manner described above, a Fund's liquidity and the ability of
the Adviser to manage it might be affected in the event its commitments to
purchase "when-issued" or "delayed-delivery" securities ever exceeded 25% of the
value of its total assets. Under normal market conditions, however, a Fund's
commitments to purchase "when-issued" or "delayed-delivery" securities will not
exceed 25% of the value of its total assets.
Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, a Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause such Fund to miss a price or yield considered to be advantageous. If a
Fund sells a "when-issued" or "delayed-delivery" security before a delivery, any
gain would be taxable.
MORTGAGE-RELATED SECURITIES (ALL FUNDS EXCEPT GLOBAL OPPORTUNITIES FUND)
Each of the Funds, except the Global Opportunities Fund, may,
consistent with its investment objective and policies, invest in
mortgage-related securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The Fixed Income Fund and Diversified Assets Fund
may, in addition, invest in mortgage-related securities issued by
non-governmental entities, including collateralized mortgage obligations
structured on pools of mortgage pass-through certificates or mortgage loans,
subject to the rating limitations described in the Prospectus.
Mortgage-related securities, for purposes of the Prospectus and this
Statement of Additional Information, represent pools of mortgage loans assembled
for sale to investors by various governmental agencies such as GNMA and
government-related organizations such as FNMA and the FHLMC, as well as by
non-governmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
are otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. Accelerated prepayments have an adverse impact on
yields for pass-through securities purchased at a premium (i.e., a price in
excess of principal amount) and may involve additional risk of loss of principal
because the premium may not have been fully amortized at the time the
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obligation is prepaid. The opposite is true for pass-through securities
purchased at a discount. The Funds may purchase mortgage-related securities at a
premium or at a discount. If a Fund purchases a mortgage-related security at a
premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in
the underlying mortgage collateral. As with other interest-bearing securities,
the prices of such securities are inversely affected by changes in interest
rates. However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the securities are prone to
prepayment, thereby shortening the life of the security and shortening the
period of time over which income at the higher rate is received. When interest
rates are rising, though, the rate of prepayment tends to decrease, thereby
lengthening the period of time over which income at the lower rate is received.
For these and other reasons, a mortgage-related security's average maturity may
be shortened or lengthened as a result of interest rate fluctuations and,
therefore, it is not possible to predict accurately the security's return to the
Funds. In addition, regular payments received in respect of mortgage-related
securities include both interest and principal. No assurance can be given as to
the return the Funds will receive when these amounts are reinvested.
There are a number of important differences among the agencies and the
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie
Maes") which are guaranteed as to the timely payment of principal and interest
by GNMA and such guaranty is backed by the full-faith and credit of the United
States. GNMA is a wholly-owned U.S. government corporation within the Department
of Housing and Urban Development. GNMA certificates are also supported by the
authority of the GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee. Mortgage-related securities issued by FNMA include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of FNMA and are not backed by or entitled to
the full faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of the principal and interest by FNMA. Mortgage-related
securities issued by FHLMC include FHLMC mortgage participation certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate instrumentality of
the United States, organized pursuant to an Act of Congress, which is owned
entirely by the Federal Home Loan banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on account
of its guarantee of ultimate payment of principal at any time after default on
an underlying mortgage, but in no event later than one year after it becomes
payable.
Mortgage-related securities in which the above-named Funds may invest
may also include collateralized mortgage obligations ("CMOs"). CMOs are debt
obligations issued generally by finance subsidiaries or trusts that are secured
by mortgage-backed certificates, including, in many cases, certificates issued
by government-related guarantors, including GNMA, FNMA and FHLMC, together with
certain funds and other collateral. Although payment of the principal of and
interest on the mortgage-backed certificates pledged to secure the CMOs may be
guaranteed by GNMA, FNMA or FHLMC, the CMOs represent obligations solely of the
issuer and are not insured or guaranteed by GNMA, FHLMC, FNMA or any other
governmental agency, or by any other person or entity. The issuers of the CMOs
typically have no significant assets other than those pledged as collateral for
the obligations.
CMOs are issued in multiple classes. Each class of CMOs, often referred
to as a "tranche," is issued at a specific adjustable or fixed interest rate and
must be fully retired no later than its final
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distribution date. Principal prepayments on the mortgage loans or the mortgage
assets underlying the CMOs may cause some or all of the classes of CMOs to be
retired substantially earlier than their final distribution dates. Generally,
interest is paid or accrues on all classes of CMOs on a monthly basis.
The principal of and interest on the mortgage assets may be allocated
among the several classes of CMOs in various ways. In certain structures (known
as "sequential pay" CMOs), payments of principal, including any principal
prepayments, on the mortgage assets generally are applied to the classes of CMOs
in the order of their respective final distribution dates. Thus, no payment of
principal will be made on any class of sequential pay CMOs until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are those which are structured to apply principal
payments and prepayments of the mortgage assets to two or more classes
concurrently on a proportionate or disproportionate basis. These simultaneous
payments are taken into account in calculating the final distribution date of
each class.
CORPORATE DEBT SECURITIES (ALL FUNDS)
The Funds may invest in investment grade corporate debt securities
subject to the limitations set forth in the Prospectus. Depending upon the
prevailing market conditions, the Adviser may purchase debt securities at a
discount from face value, which produces a yield greater than the coupon rate.
Conversely, if debt securities are purchased at a premium over face value the
yield will be lower than the coupon rate. The Fixed Income Fund expects to
invest in bonds, notes and debentures of a wide range of U.S. corporate issuers.
Such obligations, in the case of debentures will represent unsecured promises to
pay, and in the case of notes and bonds, may be secured by mortgages on real
property or security interests in personal property and will in most cases
differ in their interest rates, maturities and times of issuance.
The Fixed Income Fund and Diversified Assets Fund may invest without
limitation in securities which are rated the fourth highest rating group
assigned by an NRSRO (e.g., securities rated BBB by S&P or Baa by Moody's) or,
if not rated, are of comparable quality as determined by the Adviser
("Medium-Grade Securities"). After purchase by a Fund, a security may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event will require a sale of such security by the Fund. A
split rated security, i.e., rated in the fourth highest category by one NRSRO
and also rated below the fourth highest category by another NRSRO, will not be
considered a "medium grade security."
As with other fixed-income securities, Medium-Grade Securities are
subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of an issuer to make payments of principal and interest.
Medium-Grade Securities are considered by Moody's to have speculative
characteristics.
The Fixed Income Fund and the fixed income portion of the Diversified
Assets Fund may invest up to 20% of its total assets in lower rated securities.
Fixed income securities with ratings below Baa (Moody's) or BBB (S&P) are
considered below investment grade and are commonly referred to as "junk" bonds
("Lower Rated Securities"). The Fixed Income Fund also may invest in unrated
lower quality bonds.
These Lower Rated Securities generally offer higher interest payments
because the company that issues the bond - the issuer - is at greater risk of
default (failure to repay the bond). This may be because the issuer is small or
new to the market, the issuer has financial difficulties, or the issuer has a
greater amount of debt.
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Some risks of investing in lower rated securities include:
o Greater credit risk - Because of their more precarious financial position,
issuers of high yield bonds may be more vulnerable to changes in the
economy or to interest rate changes that might affect their ability to
repay debt.
o Reduced liquidity - There are fewer investors willing to buy high yield
bonds than there are for higher rated, investment grade securities.
Therefore, it may be more difficult to sell these securities or to receive
a fair market price for them.
o Lack of historical data - Because high yield bonds are a relatively new
type of security, there is little data to indicate how such bonds will
behave in a prolonged economic downturn. However, there is a risk that such
an economic downturn would negatively affect the ability of issuers to
repay their debts, leading to increased defaults and overall losses to the
Fund.
Particular types of Medium-Grade and Lower Rated Securities may present
special concerns. The prices of payment-in-kind or zero-coupon securities react
more strongly to changes in interest rates than the prices of other Medium-Grade
or Lower Rated Securities. Some Medium-Grade Securities in which a Fund may, and
some Lower Rated Securities which the Fixed Income Fund and the Diversified
Assets Fund may, invest may be subject to redemption or call provisions that may
limit increases in market value that might otherwise result from lower interest
rates while increasing the risk that such Fund may be required to reinvest
redemption or call proceeds during a period of relatively low interest rates.
The credit ratings issued by Moody's and S&P are subject to various
limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade or Lower Rated
Securities. In certain circumstances, the ratings may not reflect in a timely
fashion adverse developments affecting an issuer. For these reasons, the Adviser
conducts its own independent credit analysis of Medium-Grade and Lower Rated
Securities.
RESTRICTED SECURITIES (ALL FUNDS)
Securities in which each of the Funds may invest include securities
issued by corporations without registration under the Securities Act of 1933, as
amended (the "1933 Act"), in reliance on the so-called "private placement"
exemption from registration which is afforded by Section 4(2) of the 1933 Act
("Section 4(2) Securities"). Section 4(2) Securities are restricted as to
disposition under the federal securities laws, and generally are sold to
institutional investors, such as the Funds, who agree that they are purchasing
the securities for investment and not with a view to public distribution. Any
resale must also generally be made in an exempt transaction. Section 4(2)
Securities are normally resold to other institutional investors through or with
the assistance of the issuer or investment dealers who make a market in such
Section 4(2) Securities, thus providing liquidity. The Trust's Board of Trustees
has delegated to the Adviser the day-to-day authority to determine whether a
particular issue of Section 4(2) Securities that are eligible for resale under
Rule 144A under the 1933 Act should be treated as liquid. Rule 144A provides a
safe-harbor exemption from the registration requirements of the 1933 Act for
resales to "qualified institutional buyers" as defined in the Rule. With the
exception of registered broker-dealers, a qualified institutional buyer must
generally own and invest on a discretionary basis at least $100 million in
securities.
The Adviser may deem Section 4(2) Securities liquid if it believes
that, based on the trading markets for such security, such security can be
disposed of within seven (7) days in the ordinary course of business at
approximately the amount at which a Fund has valued the security. In making such
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determination, the Adviser generally considers any and all factors that it deems
relevant, which may include: (i) the credit quality of the issuer; (ii) the
frequency of trades and quotes for the security; (iii) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (iv) dealer undertakings to make a market in the security; and (v)
the nature of the security and the nature of market-place trades.
Subject to the limitations described above, the Funds may acquire
investments that are illiquid or of limited liquidity, such as private
placements or investments that are not registered under the 1933 Act. An
illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by a Fund. The price a Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of these securities will
reflect any limitations on their liquidity. A Fund may not invest in additional
illiquid securities if, as a result, more than 15% (10% in the case of Money
Market Fund) of the market value of its net assets would be invested in illiquid
securities.
Treatment of Section 4(2) Securities as liquid could have the effect of
decreasing the level of a Fund's liquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
REPURCHASE AGREEMENTS (ALL FUNDS)
Securities held by each of the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund would acquire
securities from member banks of the Federal Deposit Insurance Corporation and
registered broker-dealers which the Adviser deems creditworthy, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon date
and price. The repurchase price would generally equal the price paid by a Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain at all times the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). If the seller were to default on its
repurchase obligations or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from the sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Additionally, there is no controlling legal
precedent confirming that a Fund would be entitled, as against the claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although the Board of Trustees of the Trust believes that, under the
regular procedures normally in effect for the custody of a Fund's securities
subject to repurchase agreements, and under federal laws, a court of competent
jurisdiction would rule in favor of the Trust if presented with the question.
Securities subject to repurchase agreements will be held by the Trust's
Custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the Investment Company Act of 1940, as amended (the "1940 Act").
REVERSE REPURCHASE AGREEMENTS (ALL FUNDS) AND DOLLAR ROLL AGREEMENTS (FIXED
INCOME FUND AND DIVERSIFIED ASSETS FUND)
Each of the Funds may borrow money by entering into reverse repurchase
agreements and, with respect to the Fixed Income Fund and the Diversified Assets
Fund, dollar roll agreements in accordance with that Fund's investment
restrictions. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers and agree
to repurchase the securities, or substantially similar securities in the case of
a dollar roll agreement, at a mutually agreed-upon date
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and price. A dollar roll agreement is identical to a reverse repurchase
agreement except for the fact that substantially similar securities may be
repurchased. At the time a Fund enters into a reverse repurchase agreement or a
dollar roll agreement, it will place in a segregated custodial account assets
such as U.S. government securities or other liquid high-grade debt securities
consistent with the Fund's investment restrictions having a value equal to the
repurchase price (including accrued interest), and will subsequently continually
monitor the account to insure that such equivalent value is maintained. Reverse
repurchase agreements and dollar roll agreements involve the risk that the
market value of the securities sold by a Fund may decline below the price at
which a Fund is obligated to repurchase the securities. Reverse repurchase
agreements and dollar roll agreements are considered to be borrowings by a Fund
under the 1940 Act and, therefore, a form of leverage. A Fund may experience a
negative impact on its net asset value if interest rates rise during the term of
a reverse repurchase agreement or dollar roll agreement. A Fund generally will
invest the proceeds of such borrowings only when such borrowings will enhance a
Fund's liquidity or when the Fund reasonably expects that the interest income to
be earned from the investment of the proceeds is greater than the interest
expense of the transaction.
OPTIONS TRADING (ALL FUNDS EXCEPT MONEY MARKET FUND)
A Fund may write (or sell) put and call options on the securities that
the Fund is authorized to buy or already holds in its portfolio. These option
contracts may be listed for trading on a national securities exchange or traded
over-the-counter. A Fund may also purchase put and call options. A Fund will not
write covered calls on more than 25% of its portfolio, and a Fund will not write
covered calls with strike prices lower than the underlying securities' cost
basis on more than 25% of its total portfolio. A Fund may not invest more than
5% of its total assets in option purchases.
A call option gives the purchaser of the option the right to buy, and
the writer has the obligation to sell, the underlying security or foreign
currency at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price or exchange rate of the security or
foreign currency, as the case may be. The premium paid to the writer is
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security or foreign
currency at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price or exchange rate of the security
or foreign currency, as the case may be. Put and call options purchased by the
Funds are valued at the last sale price, or in the absence of such a price, at
the mean between bid and asked price.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the average of the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if the Fund enters into a closing purchase transaction, it will realize
a gain (or a loss if the cost of a closing purchase transaction exceeds the net
premium received when the option is sold) and the deferred credit related to
such option will be eliminated. If an option is exercised, the Fund may deliver
the underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received and the Fund will
realize a gain or loss.
In order to close out a call option it has written, the Fund will enter
into a "closing purchase transaction" (the purchase of a call option on the same
security or currency with the same exercise price and expiration date as the
call option which such Fund previously has written). When the portfolio security
or currency subject to a call option is sold, the Fund will effect a closing
purchase transaction to close out an existing call option on that security or
currency. If such Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security or currency until the option
expires
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or that Fund delivers the underlying security or currency upon exercise. In
addition, upon the exercise of a call option by the option holder, the Fund will
forego the potential benefit represented by market depreciation over the
exercise price.
A Fund may sell "covered" put and call options as a means of hedging
the price risk of securities in the Fund's portfolio. The sale of a call option
against an amount of cash equal to the put's potential liability constitutes a
"covered put."
Over-the-counter options ("OTC options") differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than exchange-traded
options. Because OTC options are not traded on an exchange, pricing is normally
done by reference to information from a market marker. This information is
carefully monitored by the Adviser and verified in appropriate cases. OTC
options transactions will be made by a Fund only with recognized U.S. Government
securities dealers. OTC options are subject to the Funds' 15% limit on
investments in securities which are illiquid or not readily marketable (see
"Investment Restrictions"), provided that OTC option transactions by a Fund with
a primary U.S. Government securities dealer which has given the Fund an absolute
right to repurchase according to a "repurchase formula" will not be subject to
such 15% limit.
Each of the Growth Fund, Diversified Assets Fund, and Global
Opportunities Fund may also purchase or sell index options. Index options (or
options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Because index options are settled in cash, a call writer cannot
determine the amount of its settlement obligations in advance and, unlike call
writing on specific securities, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund may be required to segregate assets or provide an initial
margin to cover index options that would require it to pay cash upon exercise.
FUTURES CONTRACTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
Each of the Funds, except the Money Market Fund, may enter into futures
contracts. This investment technique is designed primarily to hedge against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities which a Fund holds or
intends to purchase. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, a Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contract, can attempt
to secure better rates or prices for the Fund than might later be available in
the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price to sell or to purchase the underlying futures contract, upon exercising
the option any time during the option period.
Futures transactions involve broker costs and require a Fund to
segregate liquid assets, such as cash, U.S. government securities or other
liquid high-grade debt obligations to cover its performance
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under such contracts. A Fund may lose the expected benefit of futures contracts
if interest rates, securities or foreign exchange rates move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of a Fund's futures positions may not prove to be perfectly or even highly
correlated with its portfolio securities and foreign currencies, limiting the
Fund's ability to hedge effectively against interest rate, foreign exchange rate
and/or market risk and giving rise to additional risks. There is no assurance of
liquidity in the secondary market for purposes of closing out futures positions.
RISKS OF FUTURES AND OPTIONS INVESTMENTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
A Fund will incur brokerage fees in connection with its futures and
options transactions, and it will be required to segregate funds for the benefit
of brokers as margin to guarantee performance of its futures and options
contracts. In addition, while such contracts will be entered into to reduce
certain risks, trading in these contracts entails certain other risks. Thus,
while a Fund may benefit from the use of futures contracts and related options,
unanticipated changes in interest rates may result in a poorer overall
performance for that Fund than if it had not entered into any such contracts.
Additionally, the skills required to invest successfully in futures and options
may differ from skills required for managing other assets in the Fund's
portfolio.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of such Fund's total assets. Such Fund will not engage in
transactions in financial futures contracts or options thereon for speculation,
but only to attempt to hedge against changes in market conditions affecting the
values of securities which such Fund holds or intends to purchase. When futures
contracts or options thereon are purchased to protect against a price increase
on securities intended to be purchased later, it is anticipated that at least
25% of such intended purchases will be completed. When other futures contracts
or options thereon are purchased, the underling value of such contracts will at
all times not exceed the sum of: (1) accrued profit on such contracts held by
the broker; (2) cash or high-quality money market instruments set aside in an
identifiable manner; and (3) cash proceeds from investments due in 30 days.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
Each of the Funds, except the Money Market Fund, may invest in forward
foreign currency exchange contracts. A Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded directly between currency traders (usually large commercial
banks) and their customers.
The Funds may enter into forward currency contracts in order to hedge
against adverse movements in exchange rates between currencies. For example,
when a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the United States
dollar cost or proceeds, as the case may be. By entering into a forward currency
contract in United States dollars for the purchase or sale of the amount of
foreign currency involved in an underlying security transaction, such Fund is
able to protect itself against a possible loss between trade and settlement
dates resulting from an adverse change in the relationship between the United
States dollar and such foreign currency. Additionally, for example, when a Fund
believes that a foreign currency may
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suffer a substantial decline against the U.S. dollar, it may enter into a
forward currency sale contract to sell an amount of that foreign currency
approximating the value of some or all of that Fund's portfolio securities or
other assets denominated in such foreign currency. Alternatively, when a Fund
believes a foreign currency will increase in value relative to the U.S. dollar,
it may enter into a forward currency purchase contract to buy that foreign
currency for a fixed U.S. dollar amount; however, this tends to limit potential
gains which might result from a positive change in such currency relationships.
No Fund intends to enter into such forward foreign currency exchange
contracts if such Fund would have more than 15% of the value of its total assets
committed to such contracts on a regular or continuous basis. A Fund also will
not enter into such forward contracts or maintain a net exposure on such
contracts where such Fund would be obligated to deliver an amount of foreign
currency in excess of the value of such Fund's securities or other assets
denominated in that currency. The Adviser believes that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interests of a Fund. The Fund's Custodian segregates cash
or liquid high-grade securities in an amount not less than the value of the
Fund's total assets committed to forward foreign currency exchange contracts
entered into for the purchase of a foreign security. If the value of the
securities segregated declines, additional cash or securities are added so that
the segregated amount is not less than the amount of such Fund's commitments
with respect to such contracts. The Funds generally do not enter into a forward
contract for a term longer than one year.
If the Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or a loss to the extent that there has
been a movement in forward currency contract prices. If the Fund engages in an
offsetting transaction it may subsequently enter into a new forward currency
contract to sell the foreign currency. If forward prices decline during the
period between which a Fund enters into a forward currency contract for the sale
of foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, such Fund would realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. The Funds will have to convert their
holdings of foreign currencies into United States dollars from time to time.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies.
FOREIGN CURRENCY OPTIONS AND FUTURES TRANSACTIONS (GLOBAL OPPORTUNITIES FUND)
The Global Opportunities Fund may invest in foreign currency options. A
foreign currency option provides the option buyer with the right to buy or sell
a stated amount of foreign currency at the exercise price at a specified date or
during the option period. A call option gives its owner the right, but not the
obligation, to buy the currency while a put option gives its owner the right,
but not the obligation, to sell the currency. The option seller (writer) is
obligated to fulfill the terms of an option sold if it is exercised. However,
either seller or buyer may close its position during the option period in the
secondary market for such options at any time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against the
decline of the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of the purchase and the settlement date,
the Fund
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would not have to exercise its call, but could acquire in the spot market the
amount of foreign currency needed for settlement.
The Global Opportunities Fund may invest in foreign currency futures
transactions. As part of its financial futures transactions, the Fund may use
foreign currency futures contracts and options on such futures contracts.
Through the purchase or sale of such contracts, the Fund may be able to achieve
many of the same objectives it may achieve through forward foreign currency
exchange contracts more effectively and possibly at a lower cost. Unlike forward
foreign currency exchange contracts, foreign currency futures contracts and
options on foreign currency futures contracts are standardized as to amount and
delivery, and may be traded on boards of trade and commodities exchanges or
directly with a dealer which makes a market in such contracts and options. It is
anticipated that such contracts may provide greater liquidity and lower cost
than forward foreign currency exchange contracts.
LENDING OF PORTFOLIO SECURITIES (ALL FUNDS)
In order to generate additional income, each of the Funds may, from
time to time, lend its portfolio securities to broker-dealers, banks or
institutional borrowers of securities. A Fund must receive 102% collateral in
the form of cash or U.S. government securities. This collateral must be valued
daily by the Adviser and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund. During
the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While the Fund does not have the right
to vote securities on loan, it intends to terminate the loan and regain the
right to vote if that is considered important with respect to the investment. In
the event the borrower defaults in its obligation to a Fund, the Fund bears the
risk of delay in the recovery of its portfolio securities and the risk of loss
of rights in the collateral. The Fund will only enter into loan arrangements
with broker-dealers, banks or other institutions which the Adviser has
determined are creditworthy under guidelines established by the Trust's Board of
Trustees.
CONVERTIBLE SECURITIES (ALL FUNDS EXCEPT MONEY MARKET FUND)
Convertible securities give the holder the right to exchange the
security for a specific number of shares of common stock. Convertible securities
include convertible preferred stocks, convertible bonds, notes and debentures,
and other securities. Convertible securities typically involve less credit risk
than common stock of the same issuer because convertible securities are "senior"
to common stock -- i.e., they have a prior claim against the issuer's assets.
Convertible securities generally pay lower dividends or interest than
non-convertible securities of similar quality. They may also reflect changes in
the value of the underlying common stock.
REAL ESTATE INVESTMENT TRUSTS (ALL FUNDS EXCEPT MONEY MARKET FUND)
Each Fund, except the Money Market Fund, may invest in equity or debt
REITs. Equity REITs are trusts that sell shares to investors and use the
proceeds to invest in real estate or interests in real estate. Debt REITs invest
in obligations secured by mortgages on real property or interests in real
property. A REIT may focus on particular types of projects, such as apartment
complexes or shopping centers, or on particular geographic regions, or both. An
investment in a REIT may be subject to certain risks similar to those associated
with direct ownership of real estate, including: declines in the value of real
estate; risks related to general and local economic conditions, overbuilding and
competition; increases in property taxes and operating expenses; and variations
in rental income. Also, REITs may not be diversified. A REIT may fail to qualify
for pass-through tax treatment of its income under the Internal Revenue Code of
1986, as amended (the "Code") and may also fail to maintain its exemption from
registration under the
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1940 Act. Also, REITs (particularly equity REITs) may be dependent upon
management skill and face risks of failing to obtain adequate financing or
favorable terms.
INVESTMENT RESTRICTIONS
Each Fund's investment objective may not be changed without a vote of
the holders of a majority of the Fund's outstanding shares. In addition, the
following investment restrictions may be changed with respect to a particular
Fund only by the vote of a majority of the outstanding shares of that Fund (as
defined under "ADDITIONAL INFORMATION - Vote of a Majority of the Outstanding
Shares" in this Statement of Additional Information). All other investment
limitations described in the Prospectus or this Statement of Additional
Information may be changed by the Trust's Board of Trustees.
No Fund may:
1. Act as an underwriter of securities within the meaning of the 1933
Act except insofar as it might be deemed to be an underwriter upon the
disposition of portfolio securities acquired within the limitation on purchases
of illiquid securities and except to the extent that the purchase of obligations
directly from the issuer thereof in accordance with its investment objective,
policies and limitations may be deemed to be underwriting;
2. Invest in commodities, except that as consistent with its investment
objective and policies the Fund may: (a) purchase and sell options, forward
contracts, futures contracts, including without limitation those relating to
indices; (b) purchase and sell options on futures contracts or indices; and (c)
purchase publicly traded securities of companies engaging in whole or in part in
such activities.
3. Purchase or sell real estate, except that it may purchase securities
of issuers which deal in real estate and may purchase securities which are
secured by interests in real estate;
4. Purchase any securities which would cause 25% or more of the value of
its total assets at the time of purchase to be invested in the securities of one
or more issuers conducting their principal business activities in the same
industry, provided that:
(a) there is no limitation with respect to obligations issued
or guaranteed by the U.S. government, any state, territory or possession
of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions, and
repurchase agreements secured by such instruments;
(b) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily
related to financing the activities of the parents;
(c) utilities will be divided according to their services, for
example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry; and
(d) personal credit and business credit businesses will be
considered separate industries.
5. Purchase securities of any one issuer, other than securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer or the Fund would hold more than 10% of
any class of securities of the issuer or more than 10% of the outstanding voting
securities of the issuer, except that up to 25% of the value of the Fund's total
assets may be invested without regard to such limitations.
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6. Make loans, except that a Fund may purchase and hold debt instruments
and enter into repurchase agreements in accordance with its investment objective
and policies and may lend portfolio securities in an amount not exceeding
one-third of its total assets.
7. Issue senior securities except to the extent permitted under the 1940
Act or any rule, order or interpretation thereunder.
8. Borrow money (not including reverse repurchase agreements or dollar
roll agreements), except that each Fund may borrow from banks for temporary or
emergency purposes and then only in amounts up to 30% of its total assets at the
time of borrowing (and provided that such bank borrowings and reverse repurchase
agreements and dollar roll agreements do not exceed in the aggregate one-third
of the Fund's total assets (10% in the case of the Money Market Fund) less
liabilities other than the obligations represented by the bank borrowings,
reverse repurchase agreements and dollar roll agreements), or mortgage, pledge
or hypothecate any assets except in connection with a bank borrowing in amounts
not to exceed 30% of the Fund's net assets at the time of borrowing.
For purposes of the above investment limitations, the Funds treat all
supranational organizations as a single industry and each foreign government
(and all of its agencies) as a separate industry. In addition, a security is
considered to be issued by the government entity (or entities) whose assets and
revenues back the security.
With respect to investment limitation No. 2 above, "commodities"
includes commodity contracts. With respect to investment limitation No. 8 above,
and as a non-fundamental policy which may be changed without the vote of
shareholders, no Fund will purchase securities while its outstanding borrowings
(including reverse repurchase agreements) are in excess of 5% of its total
assets. Securities held in escrow or in separate accounts in connection with a
Fund's investment practices described in the Funds' Prospectus or Statement of
Additional Information are not deemed to be pledged for purposes of this
limitation.
In addition, the Funds are subject to the following non-fundamental
limitations, which may be changed without the vote of shareholders.
No Fund may:
1. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except as consistent with the Fund's investment objective
and policies for transactions in options on securities or indices of securities,
future contracts and options on futures contracts and in similar investments.
2. Purchase securities on margin, make short sales of securities or
maintain a short position, except that, as consistent with a Fund's investment
objective and policies, (a) this investment limitation shall not apply to the
Fund's transactions in futures contracts and related options, options on
securities or indices of securities and similar instruments, and (b) it may
obtain short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities.
3. Purchase securities of companies for the purpose of exercising
control.
4. Invest more than 15% (10% with respect to the Money Market Fund) of
its net assets in illiquid securities.
Except for the Funds' policy on illiquid securities, and borrowing, if
a percentage limitation is satisfied at the time of investment, a later increase
or decrease in such percentage resulting from a change
20
<PAGE> 48
in the value of a Fund's portfolio securities will not constitute a violation of
such limitation for purposes of the 1940 Act.
TEMPORARY DEFENSIVE POSITIONS
In order to meet liquidity needs or for temporary defensive purposes,
each Fund may hold investments including uninvested cash reserves, that are not
part of its main investment strategy. Each of the Growth Fund, Global
Opportunities Fund, Diversified Assets Fund and Fixed Income Fund (the
"Non-Money Market Funds") may invest up to 100% of its total assets in money
market instruments, including short-term debt securities issued by the U.S.
Government and its agencies and instrumentalities, domestic bank obligations,
commercial paper or in repurchase agreements secured by bank instruments (with
regard to the Global Opportunities Fund, such investment may include those of
foreign governments and companies). In addition, each Non-Money Market Fund may
hold equity securities which, in the Adviser's opinion, are more conservative
than the types of securities in which the Fund typically invests. To the extent
the Funds are engaged in temporary or defensive investments, a Fund will not be
pursuing its investment objective.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the securities. The SEC requires that
the calculation exclude all securities whose maturities at the time of
acquisition are one year or less. The portfolio turnover rates for the Funds of
the Trust may vary greatly from year to year as well as within a particular
year, and may also be affected by cash requirements for redemption of shares.
High portfolio turnover rates will generally result in higher transaction costs
to a Fund, including brokerage commissions, and may result in additional tax
consequences to a Fund's shareholders.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Trust's Funds are sold on a continuous basis by the
Trust's distributor, BISYS Fund Services Limited Partnership (the "Distributor
"or "BISYS LP"), and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the Valuation Times
defined in the Prospectus on each Business Day of the Trust. A "Business Day" is
a day on which the New York Stock Exchange (the "NYSE") is open for trading.
Currently, the NYSE will not be open in observance of the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
VALUATION OF THE MONEY MARKET FUND
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price a Fund would receive if it sold the instrument. The value of
securities in the Money Market Fund can be expected to vary inversely with
changes in prevailing interest rates.
21
<PAGE> 49
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average maturity appropriate to the Fund's objective of
maintaining a stable net asset value per share, provided that the Fund will not
purchase any security with a remaining maturity of more than 397 days (thirteen
months) (securities subject to repurchase agreements may bear longer maturities)
nor will it maintain a dollar-weighted average maturity which exceeds 90 days.
The Trust's Board of Trustees has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
investment objective of the Fund, to stabilize the net asset value per share of
the Fund for purposes of sales and redemptions at $1.00. These procedures
include review by the Trustees, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per share of the Fund
calculated by using available market quotations deviates from $1.00 per share.
In the event such deviation exceeds 0.5%, Rule 2a-7 requires that the Board of
Trustees promptly consider what action, if any, should be initiated. If the
Trustees believe that the extent of any deviation from the Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to new or existing investors, they will take such steps as they consider
appropriate to eliminate or reduce, to the extent reasonably practicable, any
such dilution or unfair results. These steps may include selling portfolio
instruments prior to maturity, shortening the dollar-weighted average maturity,
withholding or reducing dividends, reducing the number of the Fund's outstanding
shares without monetary consideration, or utilizing a net asset value per share
determined by using available market quotations. As permitted by Rule 2a-7 and
the procedures adopted by the Board, certain of the Board's responsibilities
under the Rule may be delegated to the Adviser.
VALUATION OF THE NON-MONEY MARKET FUNDS
Portfolio securities, the principal market for which is a securities
exchange, will be valued at the closing sales price on that exchange on the day
of computation or, if there have been no sales during such day, at the latest
bid quotation. Portfolio securities, the principal market for which is not a
securities exchange, will be valued at their latest bid quotation in such
principal market. In either case, if no such bid price is available then such
securities will be valued in good faith at their respective fair market values
using methods by or under the supervision of the Board of Trustees of the Trust.
Portfolio securities with a remaining maturity of 60 days or less will be valued
either at amortized cost or original cost plus accrued interest, which
approximates current value.
Portfolio securities which are primarily traded on foreign exchanges
may be valued with the assistance of a pricing service and are generally valued
at the preceding closing values of such securities on their respective
exchanges, except that when an occurrence subsequent to the time a foreign
security is valued is likely to have changed such value, then the fair value of
those securities may be determined by consideration of other factors by or under
the direction of the Board of Trustees. Over-the-counter securities are valued
on the basis of the bid price at the close of business on each business day.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Trustees. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
All other assets and securities, including securities for which market
quotations are not readily available, will be valued at their fair value as
determined in good faith under the general supervision of the Board of Trustees
of the Trust.
22
<PAGE> 50
REDEMPTION IN KIND
Although the Funds intend to pay share redemptions in cash, the Funds
reserve the right to make payment in whole or in part in securities rather than
cash, known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than $250,000 or 1% of a Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind will
consist of securities equal in market value to your shares. When you convert
these securities to cash, you will pay brokerage charges.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
Overall responsibility for management of the Trust rests with its Board
of Trustees, who are elected by the shareholders of the Trust. The Trustees
elect the officers of the Trust to supervise its day-to-day operations.
The Trust will be managed by the Trustees in accordance with the laws
of the state of Delaware governing business trusts. There are currently four
Trustees, one of whom is an "interested person" of the Trust within the meaning
of that term under the 1940 Act. The Trustees of the Trust receive $2,000 for
each Board meeting attended, plus reimbursement for expenses incurred in
connection with attending meetings. However, no officer or employee of the
Distributor, BISYS Fund Services Ohio, Inc. ("BISYS"), or Allianz of America,
Inc. (the "Adviser") or its affiliates receives any compensation from the Trust
for acting as a Trustee of the Trust. The officers of the Trust receive no
compensation directly from the Trust for performing the duties of their offices.
BISYS, an affiliate of the Distributor, receives fees from the Trust for acting
as Administrator and Transfer Agent, and for providing certain fund accounting
services.
The Trustees and Officers of the Trust, their addresses, ages and their
principal occupations during the past 5 years are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
NAME AND ADDRESS POSITION WITH THE TRUST AND OTHER AFFILIATIONS
<S> <C> <C>
David P. Marks*, Age 53 Chairman of the Board, Chief Investment Officer of Allianz
55 Greens Farms Road Trustee and President of America, Inc. from 1991 to
Westport, CT 06881-5160 present.
Harrison Conrad, Age 65 Trustee Retired; Board member of Capital Re
79 Dorchester Road Corporation, a financial-guaranty
Darien, CT 06820 re-insurer from 1995 to present;
Retired from J.P. Morgan in 1995
after 34 years.
Roger Gelfenbien, Age 56 Trustee Retired; Partner of Andersen
37 Stonegate Drive Consulting from 1983 to August, 1999.
Wethersfield, CT 06109
</TABLE>
23
<PAGE> 51
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
NAME AND ADDRESS POSITION WITH THE TRUST AND OTHER AFFILIATIONS
<S> <C> <C>
Arthur C. Reeds III, Age 55 Trustee Chairman, Chief Executive and
36 Fernwood Road President of Conning Corp., a money
West Hartford, CT 06119 manager, from September 1999 to
present; Investment Consultant from
1997 to September 1999; Chief
Investment Officer of CIGNA
Corporation from 1991 to 1997.
Charles L. Booth, Age 40 Vice President Vice President of Fund
BISYS Fund Services, Inc. Administration of BISYS Fund
3435 Stelzer Road Services from April 1988 to present.
Columbus, Ohio 43219
Gary Brown, Age 46 Vice President Senior Managing Director of Allianz
55 Greens Farms Road of America, Inc. from 1991 to
Westport, CT 06881-5160 present.
Ronald M. Clark, Age 52 Vice President Senior Managing Director of Allianz
55 Greens Farms Road of America, Inc. from 1980 to
Westport, CT 06881-5160 present.
Edwin Ghigliotty, Age 43 Vice President Chief Administrative Officer of
55 Greens Farms Road Allianz of America, Inc. from April
Westport, CT 06881-5160 1999 to present; Senior Vice
President of Operations and Chief
Financial Officer of Jefferson
Insurance Group from 1991 to April
1999.
Gregory T. Maddox, Age 32 Vice President Vice President, Client Services of
BISYS Fund Services, Inc. BISYS Fund Services from April 1991
1230 Columbia St., Suite 500 to present.
San Diego, CA 92101
Irimga McKay, Age 39 Vice President Senior Vice President, Client
BISYS Fund Services, Inc. Services of BISYS Fund Services from
1230 Columbia St., Suite 500 November 1988 to present.
San Diego, CA 92101
</TABLE>
24
<PAGE> 52
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
NAME AND ADDRESS POSITION WITH THE TRUST AND OTHER AFFILIATIONS
<S> <C> <C>
Chris Pinkerton, Age 42 Vice President President, USAllianz Investor
1750 Hennepin Avenue Services and Vice President, Allianz
Minneapolis, MN 55403-2195 Life Insurance Co. of North America
from April 1999 to present; Vice
President of marketing, sales
operations and director of marketing
at Nationwide Financial Services
from May 1977 to April 1999.
Jennifer L. Ryan, Age 34 Vice President Director of Mutual Funds, Allianz of
55 Greens Farms Road America, Inc. from October 1999 to
Westport, CT 06881-5160 present; Managing Director, Key
Asset Management from 1993 to
October 1999.
Brian Welker, Age 32 Vice President Senior Business Analyst and
55 Greens Farms Road Compliance Officer at Allianz of
Westport, CT 06881-5160 America, Inc. from May 1998 to
present, Internal Auditor with the
Internal Revenue Service from 1989
to 1998.
Lisa M. Hurley, Age 44 Secretary Senior Vice President and General
BISYS Fund Services, Inc. Counsel of BISYS Fund Services from
90 Park Avenue May 1998 to present; General Counsel
New York, NY 10016 of Moore Capital Management, Inc.
from May 1996 to May 1998; Senior
Vice President & General Counsel of
Northstar Investment Management
Corporation from October 1993 to May
1996.
</TABLE>
25
<PAGE> 53
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DURING PAST 5 YEARS
NAME AND ADDRESS POSITION WITH THE TRUST AND OTHER AFFILIATIONS
<S> <C> <C>
Paige C. Hodgin, Age 34 Assistant Secretary Director of Legal Services of BISYS
BISYS Fund Services, Inc. Fund Services from January 1992 to
3435 Stelzer Road present.
Columbus, Ohio 43219
Alaina V. Metz, Age 33 Assistant Secretary Chief Administrative Officer of
BISYS Fund Services, Inc. BISYS Fund Services from June 1995
3435 Stelzer Road to present; Supervisor of
Columbus, Ohio 43219 Alliance Capital Management for
more than five years prior to
joining BISYS.
Gary Tenkman, Age 29 Treasurer Vice President of Financial Services
BISYS Fund Services, Inc. of BISYS Fund Services from April
3435 Stelzer Road 1998 to present; Audit Manager for
Columbus, Ohio 43219 Ernst & Young LLP for more than five
years prior to joining BISYS.
</TABLE>
*Mr. Marks is an "interested person" of the Trust, as defined in the
1940 Act because of his employment with the Adviser. He receives no compensation
from the Trust for acting as a Trustee. It is anticipated that each Trustee
(except Mr. Marks) will receive an aggregate of $8,000 in compensation from the
Trust and total compensation from the Trust and the Fund Complex of $16,000 for
the first fiscal year of the Trust.
Each of the above-named Trustees and officers also hold the same
position with USAllianz Funds, an investment company that is also advised by the
Adviser. The Trust and USAllianz Funds comprise the USAllianz "Fund Complex."
26
<PAGE> 54
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 5, 2000, the Trustees and officers of the Trust, as a
group, owned none of the shares of any Fund of the Trust. As of April 5, 2000,
the following persons were 5% or greater shareholders of the Funds:
PERCENTAGE OF
FUND/SHAREHOLDER SHARES OUTSTANDING
Diversified Assets Fund/ 85.58%
Allianz of America, Inc.
777 San Marin Drive
Novato, CA 94998
Diversified Assets Fund/ 11.81%
Allianz Life Insurance Co. of N. America
1750 Hennepin Avenue
Minneapolis, MN 55403
Fixed Income Fund/ 94.16%
Allianz of America, Inc.
777 San Marin Drive
Novato, CA 94998
Global Opportunities Fund/ 99.83%
Allianz of America, Inc.
777 San Marin Drive
Novato, CA 94998
Growth Fund/ 89.93%
Allianz of America, Inc.
777 San Marin Drive
Novato, CA 94998
Growth Fund/ 8.43%
Allianz Life Insurance Co. of N. America
1750 Hennepin Avenue
Minneapolis, MN 55403
Money Market Fund/ 99.12%
Allianz of America, Inc.
777 San Marin Drive
Novato, CA 94998
The Adviser may be presumed to control both the Trust and each of the
Funds because it possesses or shares investment or voting power with respect to
more than 25% of the total shares outstanding of certain of the Funds. As a
result, the Adviser may have the ability to elect the Trustees of the Trust,
approve the Investment Advisory and Distribution Agreements for each of the
Funds and to control any other matters submitted to the shareholders of the
Funds for their approval or ratification.
27
<PAGE> 55
THE ADVISER
Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment objectives and restrictions, investment
advisory services are provided to the Funds of the Trust by the Adviser.
The Adviser has been a registered investment adviser since 1981. The
Adviser, 55 Greens Farms Road, Westport, Connecticut 06881 is a Delaware
corporation incorporated on June 15, 1976 and as of December 31, 1999 had
approximately $21 billion of assets under management. Allianz AG Holding is the
principal owner of the Adviser. Allianz AG Holding, headquartered in Munich
Germany, is one of the world's largest insurance and financial services
companies with operations in 68 countries.
Under the Investment Advisory Agreement, the Adviser has agreed to
provide investment advisory services for each of the Trust's Funds as described
in the Prospectus. For the services provided and the expenses assumed pursuant
to the Investment Advisory Agreement, each of the Trust's Funds pays the Adviser
a fee, computed daily and paid monthly, at an annual rate calculated as a
percentage of the average daily net assets of that Fund. The annual rates for
the Funds are as follows: 0.75% for the Growth Fund; 0.55% for the Diversified
Assets Fund; 0.50% for the Fixed Income Fund; 0.95% for the Global Opportunities
Fund; and 0.35% for the Money Market Fund. The Adviser may periodically
voluntarily reduce all or a portion of its advisory fee with respect to any Fund
to increase the net income of one or more of the Funds available for
distribution as dividends.
Pursuant to the Investment Advisory Agreement, the Adviser will pay all
expenses, including as applicable, the compensation of any subadvisers directly
appointed by it, incurred by it in connection with its activities under the
Investment Advisory Agreement other than the cost of securities (including
brokerage commissions) if any, purchased for the Trust.
Unless sooner terminated, the Investment Advisory Agreement continues
in effect as to a particular Fund for an initial period of two years and
thereafter for successive one-year periods if such continuance is approved at
least annually (i) by the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of such Fund and (ii) by vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreements, or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for such purpose. The Investment Advisory Agreement
is terminable as to a particular Fund at any time on 60 days' prior written
notice without penalty by the Trustees, by vote of a majority of outstanding
shares of that Fund, or by the Adviser. The Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with the performance of its duties, except a loss
suffered by a Fund resulting from a breach of fiduciary duty with respect to its
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard of its duties and
obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Trustees of the Trust and in
accordance with each Fund's objective and restrictions,
28
<PAGE> 56
which securities are to be purchased and sold by a Fund and selects brokers to
execute such Fund's portfolio transactions.
Purchases and sales of portfolio securities which are debt securities
usually are principal transactions in which portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked prices. Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. Transactions in the over-the-counter market
are generally principal transactions with dealers. With respect to the
over-the-counter market, the Trust, where possible will deal directly with the
dealers who make a market in the securities involved except under those
circumstances where better price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various
brokers and dealers is determined by the Adviser in its best judgment and in the
manner deemed fair and reasonable to shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, brokers and dealers who provide supplemental
investment research to the Adviser may receive orders for transactions on behalf
of the Trust. Information so received is in addition to and not in lieu of
services required to be performed by the Adviser and does not reduce the fees
payable to such adviser by the Trust . Such information may be useful to the
Adviser in serving both the Trust and other clients and, conversely supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to the Trust.
While the Adviser generally seeks competitive commissions, the Trust
may not necessarily pay the lowest commission available on each brokerage
transaction for the reasons discussed above.
Except as permitted by applicable rules under the 1940 Act, the Trust
will not acquire portfolio securities issued by, make savings deposits in, or
enter into repurchase or reverse repurchase agreements with the Adviser or the
Distributor, or their affiliates, and will not give preference to the Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements. Subject to the
requirements of the 1940 Act and the oversight of the Board of Trustees of the
Trust, the Funds may borrow from the Adviser for temporary or emergency purposes
in order to meet unanticipated redemptions or to meet payment obligations when a
portfolio transaction "fails" due to circumstances beyond a Fund's control.
Investment decisions for each Fund of the Trust are made independently
from those made for the other Funds or any other portfolio investment company or
account managed by the Adviser. Any such other portfolio, investment company or
account may also invest in the same securities as the Trust. When a purchase or
sale of the same security is made at substantially the same time on behalf of a
Fund and another Fund, portfolio, investment company or account, the transaction
will be averaged as to price and available investments will be allocated as to
amount in a manner which the Adviser believes to be equitable to the Fund(s) and
such other portfolio, investment company, or account. In some instances, this
investment procedure may adversely affect the price paid or received by a Fund
or the size of the position obtained by the Fund. To the extent permitted by
law, the Adviser may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for other Funds or for other portfolios,
investment companies, or accounts in order to obtain best execution. In making
investment recommendations for the Trust, the Adviser will not inquire or take
into consideration whether an issuer of securities proposed for purchase or sale
by the Trust is a customer of the Adviser, its parent or affiliates, and, in
dealing with its customers, the Adviser, its parent and affiliates will not
inquire or take into consideration whether securities of such customers are held
by the Trust.
29
<PAGE> 57
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTANT
BISYS, whose principal location of business is 3435 Stelzer Road,
Columbus, Ohio 43219, serves as the administrator (the "Administrator"),
transfer agent (the "Transfer Agent") and fund accountant (the "Fund
Accountant") to the Trust pursuant to a Services Agreement dated as of October
6, 1999 (the "Services Agreement").
As Administrator, BISYS has agreed to maintain office facilities for
the Trust; furnish statistical and research data, clerical and certain
bookkeeping services and stationery and office supplies; prepare the periodical
reports to the SEC on Form N-SAR or any replacement forms therefor; compile data
for, prepare for execution by the Funds and file certain federal and state tax
returns and required tax filings; prepare compliance filings pursuant to state
securities laws with the advice of the Trust's counsel; keep and maintain the
financial accounts and records of the Funds, including calculation of daily
expense accruals; and generally assist in all aspects of the Trust's operations
other than those performed by the Adviser under the Investment Advisory
Agreement or by the Custodian under the Custody Agreement. Under the Services
Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
As Transfer Agent, BISYS performs the following services in connection
with each Fund's shareholders of record: maintains shareholder records;
processes shareholder purchase and redemption orders; processes transfers and
exchanges of shares of the Funds on the shareholder files and records; processes
dividend payments and reinvestments; and assists in the mailing of shareholder
reports and proxy solicitations.
As Fund Accountant, BISYS maintains the accounting books and records
for the Funds, including journals containing an itemized daily record of all
purchases and sales of portfolio securities, all receipts and disbursements of
cash and all other debits and credits, general and auxiliary ledgers reflecting
all asset, liability, reserve, capital, income and expense accounts, including
interest accrued and interest received and other required separate ledger
accounts; maintains a monthly trial balance of all ledger accounts; performs
certain accounting services for the Funds, including calculation of the net
asset value per share, calculation of the dividend and capital gain
distributions, if any, and of yield, reconciliation of cash movements with
Funds, custodians, affirmation to the Trust's custodian of all portfolio trades
and cash settlements, verification and reconciliation with the Trust's custodian
of all daily trade activities; provides certain reports; obtains dealer
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an interim
balance sheet, statement of income and expense, and statement of changes in net
assets for the Funds.
BISYS receives a fee from each Fund for its services as Administrator,
Transfer Agent and Fund Accountant and expenses assumed pursuant to the Services
Agreement, calculated daily and paid monthly, at the annual rate of 0.10% of the
combined average daily net assets of the Funds up to $5 billion; 0.07% of the
combined average daily net assets of the Funds of the next $5 billion; and 0.05%
of the combined average daily net assets of the Funds if over $10 billion. From
time to time, BISYS may waive all or a portion of the administration fee payable
to it by the Funds, either voluntarily or pursuant to applicable statutory
expense limitations.
Unless sooner terminated as provided therein, the Services Agreement
between the Trust and BISYS will continue in effect for three years. The
Services Agreement thereafter shall be renewed for successive three-year terms
unless terminated by either party not less than 60 days prior to the expiration
of such term if such continuance is approved at least annually (i) by the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the affected Fund and (ii) by vote of a majority of the Trustees
who are not interested persons (as defined in the 1940 Act) of any party to the
Services
30
<PAGE> 58
Agreement cast in person at a meeting called for such purpose. The Services
Agreement is terminable with respect to a particular Fund at any time on 60
days' written notice without penalty by vote of the Trustees, by vote of a
majority of the outstanding shares of that Fund or by BISYS.
The Services Agreement provides that BISYS shall not be liable for any
error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Services Agreement relates, except a
loss from willful misfeasance, bad faith or gross negligence in the performance
of its duties, or from the reckless disregard by BISYS of its obligations and
duties thereunder.
DISTRIBUTOR
BISYS LP, whose principal location of business is 3435 Stelzer Road,
Columbus, Ohio 43219, serves as distributor to the Trust pursuant to a
Distribution Agreement dated as of October 27, 1999 (the "Distribution
Agreement"). The Distribution Agreement provides that the Distributor will use
appropriate efforts to solicit orders for the sale of the Funds' shares from
bona fide investors and may enter into selling group agreements with responsible
dealers and dealer managers as well as sell the Funds' shares to individual
investors. The Distributor is not obligated to sell any specific amount of
shares.
Unless otherwise terminated, the Distribution Agreement between the
Trust and BISYS LP is effective for one year from the date of the Prospectus and
thereafter will continue in effect for successive one-year periods if approved
at least annually (i) by the Trust's Board of Trustees or by the vote of a
majority of the outstanding shares of the Trust, and (ii) by the vote of a
majority of the Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement is terminable at any time on
60 days' written notice without penalty by the Trustees, by a vote of a majority
of the shareholders of the Trust, or by BISYS LP on 90 days' written notice. The
Distribution Agreement will automatically terminate in the event of any
assignment as defined in the 1940 Act.
Distribution Plan. A Distribution Plan (the "Plan") has been adopted by
each of the Funds pursuant to Rule 12b-1 of the Act. Pursuant to the Plans, the
Funds may pay directly or reimburse the Distributor monthly in amounts described
in the Prospectus for costs and expenses of marketing the shares of the Funds.
The Plan provides for payments by each Fund to the Distributor at an
annual rate not to exceed 0.25% of the Fund's average net assets.
Under each Plan, each Fund pays the Distributor and other securities
dealers and other financial institutions and organizations for certain
distribution activities. Amounts received by the Distributor may, additionally,
subject to each Plan's maximums, be used to cover certain other costs and
expenses related to the distribution of Fund shares and provision of service to
Fund shareholders, including: (a) advertising by radio, television, newspapers,
magazines, brochures, sales literature, direct mail or any other form of
advertising; (b) expenses of sales employees or agents of the Distributor,
including salary, commissions, travel and related expenses; (c) costs of
printing prospectuses and other materials to be given or sent to prospective
investors; and (d) such other similar services as the Trustees determine to be
reasonably calculated to result in the sale of shares of the Funds. Each Fund
will pay all costs and expenses in connection with the preparation, printing and
distribution of the Prospectus to current shareholders and the operation of its
Plan(s), including related legal and accounting fees. A Fund will not be liable
for
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distribution expenditures made by the Distributor in any given year in excess of
the maximum amount payable under a Plan for that Fund in that year.
The Plan provides that it may not be amended to increase materially the
costs which the Funds may bear pursuant to the Plan without shareholder approval
and that other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are neither "interested persons" (as defined
in the 1940 Act) of the Trust nor have any direct or indirect financial interest
in the operation of the particular Plan or any related agreement, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The selection and nomination of the Trustees of the Trust have been committed to
the discretion of the Trustees who are not "interested persons" of the Trust.
The Plan with respect to each of the Funds was approved by the Board of Trustees
and by the Trustees who are neither "interested persons" nor have any direct or
indirect financial interest in the operation of any Plan ("Plan Trustee"), by
vote cast in person at a October 6, 1999 meeting called for the purpose of
voting on the Plan, and by the sole shareholder of each class of shares of each
of the Funds on October 26, 1999. The continuance of the Plan is subject to
similar annual approval by the Trustees and the Plan Trustees. Each Plan is
terminable at any time by a vote of a majority of the Plan Trustees or by vote
of the holders of a majority of the shares of the Fund. The Board of Trustees
has concluded that there is a reasonable likelihood that the Plan will benefit
the Funds and their shareholders.
CUSTODIAN
The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675,
serves as Custodian to the Trust pursuant to the Custody Agreement dated as of
October 6, 1999 (the "Custody Agreement"). The Custodian's responsibilities
include safeguarding and controlling the Funds' cash and securities, handling
the receipt and delivery of securities, and collecting interest and dividends on
the Funds' investments.
INDEPENDENT AUDITORS
KPMG LLP, 2 Nationwide Plaza, Columbus, OH 43215 are the independent
auditors for the Trust.
LEGAL COUNSEL
Dickstein Shapiro Morin and Oshinsky LLP, 2101 L Street NW, Washington,
D.C. 20037 serves as counsel to the Trust and the Adviser.
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CODES OF ETHICS
Federal law requires the Trust, its investment adviser and its
principal underwriter to adopt codes of ethics which govern the personal
securities transactions of their respective personnel. Accordingly, each such
entity has adopted a code of ethics pursuant to which their respective personnel
may invest securities for their personal accounts (including securities that may
be purchased or held by the Trust). Each code of ethics is included as an
exhibit to the Trust's registration statement which is on file with, and
available from, the Securities and Exchange Commission.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Delaware business trust organized on July 13, 1999. The
Declaration of Trust authorizes the issuance of an unlimited number of shares of
beneficial interest of series and classes of shares. Pursuant to such authority,
the Board of Trustees has established five series: the Growth Fund, Global
Opportunities Fund, Fixed Income Fund, Diversified Assets Fund and Money Market
Fund. Each share of each Fund represents an equal proportionate interest with
each other share of that series. Upon liquidation, shares are entitled to a pro
rata share of the Trust based on the relative net assets of each series.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual shareholder meetings. Shareholder meetings for the purpose of
electing Trustees will not be held, unless required by law, unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. At meetings of shareholders,
each share is entitled to one vote for each dollar of net asset value applicable
to such share. Shares have non-cumulative voting rights, which means that the
holders of more than 50% of the votes applicable to shares voting for the
election of Trustees can elect all of the Trustees to be elected at a meeting.
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Funds' Prospectus and in this Statement of Additional
Information, "vote of a majority of the outstanding shares" of the Trust or any
Fund means the affirmative vote, at an annual or special meeting of shareholders
duly called, of the lesser of: (a) 67% or more of the votes of shareholders of
the Trust or the Fund, present at such meeting at which the holders of more than
50% of the votes attributable to the shareholders of record of the Trust or the
Fund are represented in person or by proxy, or (b) the holders of more than
fifty percent (50%) of the outstanding votes of shareholders of the Trust or the
Fund.
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ADDITIONAL TAX INFORMATION
Each Fund intends to qualify as a "regulated investment company" (a
"RIC" under the Code). Such qualification generally will relieve the Funds of
liability for federal income taxes to the extent their earnings are distributed
in accordance with the Code. However, taxes may be imposed on the Funds,
particularly the Global Opportunities Fund, by foreign countries with respect to
income received on foreign securities. Depending on the extent of each Fund's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located, or in which it is
otherwise deemed to be conducting business, each Fund may be subject to the tax
laws of such states or localities. In addition, if for any taxable year the Fund
does not qualify for the special tax treatment afforded regulated investment
companies, all of its taxable income will be subject to a federal tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions would be taxable to shareholders to the
extent of earnings and profits, and would be eligible for the dividends-received
deduction for corporations.
A non-deductible excise tax is also imposed on regulated investment
companies that do not make distributions to shareholders on a timely basis in
accordance with calendar-year distribution requirements (regardless of whether
they otherwise have a non-calendar taxable year). These rules require annual
distributions equal to 98% of ordinary income for the calendar year plus 98% of
their capital gain net income for the one-year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a Fund is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. If distributions during a calendar year were less
than the required amount, a particular Fund would be subject to a non-deductible
excise tax equal to 4% of the deficiency.
Each of the Funds will be required in certain cases to withhold and
remit to the United States Treasury 31% of taxable distributions paid to a
shareholder who has provided either an incorrect tax identification number or no
number at all, or who is subject to withholding by the Internal Revenue Service
for failure to report properly payments of interest or dividends.
Dividends of investment company taxable income (including net
short-term capital gains) are taxable to shareholders as ordinary income.
Distributions of investment company taxable income may be eligible for the
corporate dividends-received deduction to the extent attributable to a Fund's
dividend income from U.S. corporations, and if other applicable requirements are
met. Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) designated by a Fund as capital gain
dividends are not eligible for the dividends-received deduction and will
generally be taxable to shareholders as long-term capital gains, regardless of
the length of time the Fund's shares have been held by a shareholder. Capital
gains from assets held for one year or less will be taxed as ordinary income.
Generally, dividends are taxable to shareholders, whether received in cash or
reinvested in shares of a Fund. Any distributions that are not from a Fund's
investment company taxable income or net capital gain may be characterized as a
return of capital to shareholders or, in some cases, as capital gain.
Shareholders will be notified annually as to the federal tax status of dividends
and distributions they receive and any tax withheld thereon. Dividends,
including capital gain dividends, declared in October, November, or December
with a record date of such month and paid during the following January will be
treated as having been paid by a Fund and received by shareholders on December
31 of the calendar year in which declared, rather than the calendar year in
which the dividends are actually received.
Upon the taxable disposition (including a sale or redemption) of shares
of a Fund, a shareholder may realize a gain or loss depending upon his basis in
his shares. Such gain or loss generally will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands. Such gain or loss
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital
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gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held by
the shareholder for six months or less. Further, a loss realized on a
disposition will be disallowed to the extent the shares disposed of are replaced
(whether by reinvestment of distributions or otherwise) within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. Shareholders receiving distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in each
share received equal to the net asset value of a share of the Funds on the
reinvestment date.
A portion of the difference between the issue price and the face amount
of zero coupon securities ("Original Issue Discount") will be treated as income
to any Fund holding securities with Original Issue Discount each year although
no current payments will be received by such Fund with respect to such income.
This original issue discount will comprise a part of the investment company
taxable income of such Fund which must be distributed to shareholders in order
to maintain its qualification as a RIC and to avoid federal income tax at the
level of the relevant Fund. Taxable shareholders of such a Fund will be subject
to income tax on such original issue discount, whether or not they elect to
receive their distributions in cash. In the event that a Fund acquires a debt
instrument at a market discount, it is possible that a portion of any gain
recognized on the disposition of such instrument may be treated as ordinary
income.
A Fund's investment in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or losses are subject to many complex and special tax
rules. For example, over-the-counter options on debt securities and certain
equity options, including options on stock and on narrow-based stock indexes,
will be subject to tax under Section 1234 of the Code, generally producing, a
long-term or short-term capital gain or loss upon lapse of the option or sale of
the underlying stock or security.
By contrast, a Fund's treatment of certain other options, futures and
forward contracts entered into by the Fund is generally governed by Section 1256
of the Code. These "Section 1256" positions generally include regulated futures
contracts, foreign currency contracts, non-equity options and dealer equity
options. Each such Section 1256 position held by a Fund will be marked-to-market
(i.e., treated as if it were sold for fair market value) on the last business
day of that Fund's fiscal year, and all gain or loss associated with fiscal year
transactions and marked-to-market positions at fiscal year end (except certain
currency gain or loss covered by Section 988 of the Code) will generally be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. The effect of Section 1256 mark-to-market rules may be to accelerate
income or to convert what otherwise would have been long-term capital gains into
short-term capital gains or short-term capital losses into long-term capital
losses within such Fund. The acceleration of income on Section 1256 positions
may require the Fund to accrue taxable income without the corresponding receipt
of cash. In order to generate cash to satisfy the distribution requirements of
the Code, a Fund may be required to dispose of portfolio securities that it
otherwise would have continued to hold or to use cash flows from other sources,
such as the sale of the Fund's shares. In these ways, any or all of these rules
may affect the amount, character and timing of income earned and in turn
distributed to shareholders by the Funds.
When a Fund holds options or contracts which substantially diminish its
risk of loss with respect to other positions (as might occur in some hedging
transactions), this combination of positions could be treated as a straddle for
tax purposes, resulting in possible deferral of losses, adjustments in the
holding periods of securities owned by a Fund and conversion of short-term
capital losses into long-term capital losses. Certain tax elections exist for
mixed straddles, i.e., straddles comprised of at least one Section
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1256 position and at least one non-Section 1256 position, which may reduce or
eliminate the operation of these straddle rules.
Each Fund will monitor its transactions in such options and contracts
and may make certain other tax elections in order to mitigate the effect of the
above rules and to prevent disqualification of a Fund as a RIC under Subchapter
M of the Code.
In order for a Fund to qualify as a RIC for any taxable year, at least
90% of the Fund's annual gross income must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities, including gains from foreign currencies, and
other income derived with respect to the business of investing in stock,
securities or currencies. Future Treasury regulations may provide that foreign
exchange gains may not qualify for purposes of the 90% limitation if such gains
are not directly related to a Fund's principal business of investing in stock or
securities, or options or futures with respect to such stock or securities.
Currency speculation or the use of currency forward contracts or other currency
instruments for non-hedging purposes may generate gains deemed to be not
directly related to the Fund's principal business of investing in stock or
securities and related options or futures. Each Fund will limit its activities
involving foreign exchange gains to the extent necessary to comply with the
above requirements.
The federal income tax treatment of interest rate and currency swaps is
unclear in certain respects and may in some circumstances result in the
realization of income not qualifying under the 90% limitation described above.
Each Fund will limit its interest rate and currency swaps to the extent
necessary to comply with this requirement.
Under Code Section 817(h), a segregated asset account upon which a
variable annuity contract or variable life insurance policy is based must be
"adequately diversified." A segregated asset account will be adequately
diversified if it complies with certain diversification tests set forth in
Treasury regulations. If a RIC satisfies certain conditions relating to the
ownership of its shares, a segregated asset account investing in such investment
company will be entitled to treat its pro rata portion of each asset of the
investment company as an asset for purposes of these diversification tests. The
Funds intend to meet these ownership conditions and to comply with the
diversification tests noted above. Accordingly, a segregated asset account
investing solely in shares of a Fund will be adequately diversified if the Funds
meet the foregoing requirements. However, the failure of a Fund to meet such
conditions and to comply with such tests could cause the owners of variable
annuity contracts and variable life insurance policies based on such account to
recognize ordinary income each year in the amount of any net appreciation of
such contract or policy during the year.
Provided that a Fund and a segregated asset account investing in the
Fund satisfy the above requirements, any distributions from the Fund to such
account will be exempt from current federal income taxation to the extent that
such distributions accumulate in a variable annuity contract or variable life
insurance policy.
Persons investing in a variable annuity contract or variable life
insurance policy offered by a segregated asset account investing in a Fund
should refer to the Prospectus with respect to such contract or policy for
further tax information.
Information set forth in the prospectus and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of shares of the Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its shareholders
and this description is not intended as a substitute for federal tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to
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consult their tax advisers with specific reference to their own tax situation,
including any application of foreign, state or local tax laws. In addition, the
tax discussion in the Prospectus and this Statement of Additional Information is
based on tax laws and regulations which are in effect on the date of the
Prospectus and this Statement of Additional Information; such laws and
regulations may be changed by legislative or administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE GLOBAL OPPORTUNITIES FUND
The Global Opportunities Fund may invest in non-U.S. corporations,
which would be treated as "passive foreign investment companies" ("PFICs") under
the Code which will result in adverse tax consequences upon the disposition of,
or the receipt of "excess distributions" with respect to, such equity
investments. To the extent that the Global Opportunities Fund invests in PFICs,
it may adopt certain tax strategies to reduce or eliminate the adverse effects
of certain federal tax provisions governing PFIC investments. Many non-U.S.
banks and insurance companies may not be treated as PFICs if they satisfy
certain technical requirements under the Code. To the extent that the Global
Opportunities Fund invests in foreign securities which are determined to be PFIC
securities and is required to pay a tax on such investments, a credit for this
tax would not be allowed to be passed through to the Global Opportunities Fund
shareholders. Therefore, the payment of this tax would reduce the Global
Opportunities Fund's economic return from its PFIC investments. Gains from
dispositions of PFIC shares and excess distributions received with respect to
such shares are treated as ordinary income rather than capital gains.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing their
average annual total return, aggregate total return and/or yield may be
presented in advertisements, sales literature and shareholder reports. Such
performance figures are based on historical earnings and are not intended to
indicate future performance. Average annual total return of a Fund will be
calculated for the period since the establishment of the Fund and will reflect
the imposition of the maximum sales charge, if any. Average annual total return
is measured by comparing the value of an investment in a Fund at the beginning
of the relevant period to the redemption value of the investment at the end of
the period (assuming immediate reinvestment of any dividends or capital gains
distributions) and annualizing the result. Aggregate total return is calculated
similarly to average annual total return except that the return figure is
aggregated over the relevant period instead of annualized. Yield of a Fund will
be computed by dividing a Fund's net investment income per share earned during a
recent one-month period by that Fund's per share maximum offering price (reduced
by any undeclared earned income expected to be paid shortly as a dividend) on
the last day of the period and annualizing the result.
In addition, from time to time the Funds may present their respective
distribution rates in shareholder reports and in supplemental sales literature
which is accompanied or preceded by a Prospectus and in shareholder reports.
Distribution rates will be computed by dividing the distribution per share over
a twelve-month period by the maximum offering price per share. The calculation
of income in the distribution rate includes both income and capital gains
dividends and does not reflect unrealized gains or losses, although a Fund may
also present a distribution rate excluding the effect of capital gains. The
distribution rate differs from the yield, because it includes capital gains
which are often non-recurring in nature, whereas yield does not include such
items. Distribution rates may also be presented excluding the effect of a sales
charge, if any.
Total return and yield are functions of the type and quality of
instruments held in the portfolio, levels of operation expenses and changes in
market conditions. Consequently, total return and yield will fluctuate and are
not necessarily representative of future results. Any fees charged by Life USA
or any of its affiliates with respect to customer accounts for investing in
shares of the Funds will not be included in
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<PAGE> 65
performance calculations. Such fees, if charged, will reduce the actual
performance from that quoted. In addition, if the Adviser or BISYS voluntarily
reduce all or a part of their respective fees, as further discussed in this
Prospectus, the total return of such Fund will be higher than it would otherwise
be in the absence of such voluntary fee reductions.
Yields and total returns quoted for the Funds include the effect of
deducting the Funds' expenses, but may not include charges and expenses
attributable to a particular variable annuity contract or variable life
insurance policy. Since shares of the Funds may be purchased only through a
variable annuity contract or variable life insurance policy, you should
carefully review the prospectus of the variable annuity contract or variable
life insurance policy you have chosen for information on relevant charges and
expenses. Including these charges in the quotations of the Funds' yield and
total return would have the effect of decreasing performance. Performance
information for the Funds must always be accompanied by, and reviewed with,
performance information for the insurance product which invests in the Funds.
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YIELDS OF THE MONEY MARKET FUND
The standardized seven-day yield for the Money Market Fund is computed:
(1) by determining the net change, exclusive of capital changes, in the value of
a hypothetical pre-existing account in that Fund having a balance of one share
at the beginning of the seven-day base period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts; (2) dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return; and (3) annualizing the results (i.e., multiplying the base
period return by (365/7)). The net change in the account value of the Money
Market Fund includes the value of additional shares purchased with dividends
from the original share, dividends declared on both the original share and any
additional shares, and all fees, other than non-recurring account charges
charged to all shareholder accounts in proportion to the length of the base
period and assuming that Fund's average account size. The capital changes to be
excluded from the calculation of the net change in account value are net
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation.
The effective yield for the Money Market Fund is computed by
compounding the base period return, as calculated above by adding one to the
base period return, raising the sum to a power equal to 365 divided by seven and
subtracting one from the result. Each of the thirty-day yields and effective
yields is calculated as described above except that the base period is 30 days
rather than 7 days.
At any time in the future, yields may be higher or lower than past
yields and there can be no assurance that any historical results will continue.
YIELDS OF THE NON-MONEY MARKET FUNDS
Yields of each of the Non-Money Market Funds will be computed by
analyzing net investment income per share for a recent thirty-day period and
dividing that amount by a Fund share's maximum offering price (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The yield of each of the Non-Money Market Funds will vary from time
to time depending upon market conditions, the composition of a Fund's portfolio
and operating expenses of the Trust allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of each of
the Funds.
CALCULATION OF TOTAL RETURN
Average annual total return is a measure of the change in value of the
investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of shares purchased by a hypothetical $1,000
investment in the Fund and all additional shares which would have been purchased
if all dividends and distributions paid or distributed during the period had
immediately been reinvested, (2) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period, (3) assuming redemption at the end
of the period, and (4) dividing this account value for the hypothetical investor
by the initial $1,000 investment and annualizing the result for periods of less
than one year.
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PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the Morgan Stanley Capital International EAFE Index
and those prepared by Dow-Jones & Co., Inc., Standard & Poor's Corporation,
Shearson-Lehman Brothers, Inc. and the Russell 2000 Growth Index and to data
prepared by Lipper Analytical Services, Inc. a widely recognized independent
service which monitors the performance of mutual funds, Morningstar, Inc. and
the Consumer Price Index. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The Bond
Buyer's Weekly, 20-Bond Index, The Bond Buyer's Index, The Bond Buyer, The New
York Times, Business Week, Pensions and Investments, and USA Today. In addition
to performance information, general information about these Funds that appears
in a publication such as those mentioned above, may be included in
advertisements and in reports to shareholders.
From time to time, the Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (1) discussions of general economic or financial principles (such
as the effects of compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends; (3) presentations of statistical data to
supplement such discussions; (4) descriptions of past or anticipated portfolio
holdings for one or more of the Funds within the Trust; (5) descriptions of
investment strategies for one or more of the Funds; (6) descriptions or
comparisons of various savings and investment policies (including, but not
limited to, insured bank products, annuities, qualified retirement plans and
individual stocks and bonds), which may or may not include the Funds; (7)
comparisons of investment products (including the Funds) with relevant market or
industry indices or other appropriate benchmarks; and (8) discussions of fund
rankings or ratings by recognized rating organizations. The Funds may also
include calculations, such as hypothetical compounding examples which describe
hypothetical investment results in such communications. Such performance
examples will be based on an expressed set of assumptions and are not indicative
of the performance of any of the Funds.
Morningstar, Inc., Chicago, Illinois, rates mutual funds on a one- to
five-star rating scale with five stars representing the highest rating. Such
ratings are based on a fund's historical risk/reward ratio as determined by
Morningstar relative to other funds in that fund's class. Funds are divided into
classes based upon the respective investment objectives. The one- to five-star
ratings represent the following ratings by Morningstar, respectively: Lowest,
Below Average, Neutral, Above Average and Highest.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly a Fund's yield or
performance may not provide for comparison with bank deposits or other
investments which provide fixed returns for a stated period of time. Yield and
performance are functions of a Fund's quality, composition and maturity as well
as expenses allocated to the Fund. Fees imposed on customer accounts by the
Adviser or its affiliated or correspondent banks or cash management services
will reduce a Fund's effective yield to its customers.
MISCELLANEOUS
Individual Trustees are elected by the shareholders and, subject to
removal by a vote of two-thirds of the Board of Trustees, and serve until their
successors are elected and qualified. Meetings of shareholders are not required
to be held at any specific intervals. Individual Trustees may be removed by vote
of the shareholders voting not less than two-thirds of the shares then
outstanding.
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The Trust is registered with the SEC as a management investment
company. Such registration does not involve supervision of the management
policies of the Trust.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the SEC. Copies of such information may be obtained from the SEC by payment of
the prescribed fee.
Holders of variable annuity contracts or variable life insurance
policies issued by Participating Insurance Companies for which shares of the
Funds are the investment vehicle will receive from the Participating Insurance
Companies the Trust's unaudited semi-annual financial statements and year-end
financial statements audited by the Trust's independent auditors. Each report
will show the investments owned by the Funds and the market values of the
investments and will provide other information about the Funds and their
operations.
The Trust currently does not foresee any disadvantages to the holders
of variable annuity contracts and variable life insurance policies of affiliated
and unaffiliated Participating Insurance Companies arising from the fact that
the interests of the holders of variable annuity contracts and variable life
insurance policies may differ due to differences of tax treatment or other
considerations or due to conflict between the affiliated or unaffiliated
Participating Insurance Companies. Nevertheless, the Trustees intend to monitor
events in order to identify any material irreconcilable conflicts which may
possibly arise and to determine what action, if any, should be taken in response
to such conflicts. The variable annuity contracts and variable life insurance
policies are described in the separate prospectuses issued by the Participating
Insurance Companies. The Trust assumes no responsibility for such prospectuses.
The portfolio managers of the Funds and other investment professionals
may from time to time discuss in advertising, sales literature or other
material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include, but are not
limited to, the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and capital markets; investment strategies
and techniques; investment products and tax, retirement and investment planning.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
FINANCIAL STATEMENTS
The Independent Auditors' Report and audited financial statements of
the Funds included in their Annual Report for the period from November 9, 1999
(commencement of operations) to December 31, 1999 (the "Annual Report") are
incorporated herein by reference to such Annual Report. Copies of such Annual
Report are available without charge upon written request from USAllianz VIP
Funds at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (877)
833-7113.
41
<PAGE> 69
APPENDIX
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment is strong. Within this
category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually debt obligations not having an original maturity in excess
of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation.
42
<PAGE> 70
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the rating categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1."
43
<PAGE> 71
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that the capacity for meeting financial commitments is solely reliant upon a
sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest rating
category and indicates that the obligation is regarded as non-investment grade
and therefore speculative.
CORPORATE LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
44
<PAGE> 72
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB," but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds
45
<PAGE> 73
because margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca" and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD" and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of
46
<PAGE> 74
principal, interest or preferred dividends. Debt rated "DD" is a defaulted debt
obligation, and the rating "DP" represents preferred stock with dividend
arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC," "CC" and "C" - Bonds have high default risk. Capacity for
meeting financial commitments is reliant upon sustained, favorable business or
economic developments. "CC" ratings indicate that default of some kind appears
probable, and "C" ratings signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
47
<PAGE> 75
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings: 42 69
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC" and "CC" - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include
a plus or minus sign designation which indicates where within the respective
category the issue is placed.
48
<PAGE> 76
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ----------------------
<S> <C>
(a) Agreement and Declaration of Trust dated 7/13/99(1)
(b) By-laws(1)
(c) Not Applicable
(d) Investment Advisory Agreement dated October 27, 1999*
(e) Distribution Agreement dated October 27, 1999*
(f) N/A
(g) Custody Agreement dated October 6, 1999(3)
(h)(1) Services Agreement dated October 6, 1999(3)
(h)(2) Form of Participation Agreement*
(i) Opinion and Consent of Counsel to the Registrant(3)
(j) Consent of KPMG LLP*
(k) N/A
(l) N/A
(m) Rule 12b-1 Plan of Distribution*
(n) N/A
(p)(1) Codes of Ethics*
(p)(2) Powers of Attorney(2 & 3)
</TABLE>
* Filed herewith.
(1) Filed with initial registration statement on July 21, 1999, and
incorporated herein by reference.
(2) Filed as an exhibit to Pre-Effective Amendment #1 on October 18, 1999,
and incorporated herein by reference.
(3) Filed as an exhibit to Pre-Effective Amendment #2 on October 26, 1999,
and incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
The Trust's Agreement and Declaration of Trust provides that the Trust
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Trust, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in or not opposed to the best
interests of the Trust or that such indemnification would relieve any officer or
Trustee of any liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties or, in a criminal proceeding, such Trustee or officers had reasonable
cause to believe their conduct was unlawful. The Trust, at its expense, provides
liability insurance for the benefit of its Trustees and officers.
<PAGE> 77
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Allianz of America, Inc., the Registrant's investment adviser (the "Adviser"),
is a registered investment adviser. The Adviser manages approximately $21
billion in assets. The Adviser, (and its predecessor organization) has been
engaged in advising private client accounts since 1976. The Adviser was
organized on June 15, 1976.
Set forth below is a description of other business, profession,
vocation or employment of a substantial nature in which each
member/principal/officer of the Adviser is or has been engaged, at any time
during the past two fiscal years, for his own account or in the capacity of
director, officer, employee, partner or trustee:
<TABLE>
<CAPTION>
NAME POSITION WITH ADVISER OTHER BUSINESS ADDRESS
<S> <C> <C> <C>
Henning Schulte-Noelle Director and President and Chairman, Managing Board, Koeniginstrasse 28
Chief Executive Officer Allianz AG Munich, Germany 80802
Bob McDonald Director Chief Executive Officer, 1750 Hennepin Avenue
Allianz Life Insurance Co. Minneapolis, MN 55403
of North America
Paul Achleitner Director Member of Board of Koeniginstrasse 28
Management, Allianz AG Munich, Germany 80802
Herbert F. Hansmeyer Chairman Member of Board of Koeniginstrasse 28
Management, Allianz AG Munich, Germany 80802
David P. Marks Director, Chief Investment N/A 55 Greens Farms Road
Officer and Secretary Westport, CT 06881
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NAME POSITION WITH ADVISER OTHER BUSINESS ADDRESS
<S> <C> <C> <C>
Hans-Juergen Schinzler Director Chairman of The Board of Koeniginstrasse 107
Management Munich Munich, Germany 80791
Reinsurance, Company
Ronald M. Clark Chief Operating Officer and N/A 55 Greens Farms Road
Treasurer Westport, CT 06881
Ed Ghigliotty Chief Administrative Officer Senior Vice President of 55 Greens Farms Road
(since 4/99) Operations & Chief Financial Westport, CT 06881
Officer, Jefferson Insurance
company of New York (prior
to 4/99)
Gary Brown Vice President and Manager N/A 55 Greens Farms Road
Director Westport, CT 06881
Wendell R. Kurtz Vice President and Managing N/A 55 Greens Farms Road
Director Westport, CT 06881
Raymond W. Gebhardt Assistant Secretary Assistant Tax Director, 777 San Marin Drive
Fireman's Fund Insurance Co. Novato, CA 94998
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services L.P. serves as the Registrant's principal
underwriter and serves as the principal underwriter for the following investment
companies:
BISYS FUND SERVICES LIMITED PARTNERSHIP
---------------------------------------
Alpine Equity Trust
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Governor Funds
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
Magna Funds
<PAGE> 79
Mercantile Mutual Funds, Inc.
Metamarkets.com
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
The Parkstone Advantage Fund
Republic Advisor Funds Trust
Republic Funds Trust
Sefton Funds Trust
SSgA International Liquidity Fund
Summit Investment Trust Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
(b) Officers and Directors.
<TABLE>
<CAPTION>
Name and Principal Positions and Position
Business Address Offices with Registrant with Underwriter
---------------- ----------------------- ----------------
<S> <C> <C> <C>
BISYS Fund Services, Inc. None Sole General Partner
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation None Sole Limited Partner
150 Clove Road
Little Falls, New Jersey
</TABLE>
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Registrant's accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder are in the
physical possession of the following:
BISYS Fund Services
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
31a-1(a)
31a-1(b)(2)A, B, C and D
31a-1(b) 4, 5, 6, 8, 9, 10, 11, 12
31a-2(a) 1 and 2
31a-2(c)
<PAGE> 80
Allianz of America, Inc.
55 Greens Farms Road , Westport, Connecticut 06881
--------------------------------------------------
31a-1(b) 10
31a-1(f)
31a-2(e)
31a-1(d)
31a-2(c)
31a-2(e)
Not Applicable
--------------
31a-1(b) 3 and 7
31a-1(c)
31a-1(e)
31a-2(b)
31a-2(d)
ITEM 29. MANAGEMENT SERVICES
N/A
ITEM 30. UNDERTAKINGS
(a) Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the removal of a trustee if
requested to do so by the holders of at least 10% of the
Registrant's outstanding shares.
(b) Registrant undertakes to provide the support to shareholders
specified in Section 16(c) of the 1940 Act as though that
section applied to the Registrant.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholder upon request and without charge.
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, in the State of
Ohio on the 21st day of April, 2000.
USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST
By: /s/ David P. Marks *
-----------------------------------
David P. Marks
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement of USAllianz Variable Insurance Products Trust has
been signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ David P. Marks* Trustee, Chairman of the Board, and
- ----------------------------------------- President (principal executive officer) April 21, 2000
David P. Marks
/s/ Harrison Conrad* Trustee
- ----------------------------------------- April 21, 2000
Harrison Conrad
/s/ Roger A. Gelfenbein* Trustee
- ----------------------------------------- April 21, 2000
Roger A. Gelfenbein
/s/ Arthur C. Reeds III* Trustee
- ----------------------------------------- April 21, 2000
Arthur C. Reeds III
/s/ Gary Tenkman Treasurer (principal financial and
- ----------------------------------------- accounting officer) April 21, 2000
Gary Tenkman
*By: /s/ Charles Booth
--------------------------------
Charles Booth April 21, 2000
Attorney-in-Fact
</TABLE>
<PAGE> 82
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
DESCRIPTION OF EXHIBIT EXHIBIT
- ---------------------- -------
REFERENCE
- ---------
<S> <C>
Agreement and Declaration of Trust dated July 13, 1999................................................. (a)1
By-laws ............................................................................................... (b)1
Investment Advisory Agreement dated October 27, 1999 .................................................. (d)*
Distribution Agreement dated October 27, 1999 ......................................................... (e)*
Custody Agreement dated October 6, 1999 ............................................................... (g)3
Services Agreement dated October 6, 1999 .............................................................. (h)(1)3
Form of Participation Agreement ..................................................................... (h)(2)*
Opinion and Consent of Counsel to the Registrant....................................................... (i)3
Consent of KPMG LLP.................................................................................... (j)*
Rule 12b-1 Plan of Distribution........................................................................ (m)*
Codes of Ethics........................................................................................ (p)(1)*
Powers of Attorney..................................................................................... (p)(2)2&3
</TABLE>
* Filed herewith.
- ----------
1 Filed with initial registration statement on July 21, 1999, and
incorporated herein by reference.
2 Filed as an exhibit to Pre-Effective Amendment #1 on October 18, 1999,
and incorporated by reference.
3 Filed as an exhibit to Pre-Effective Amendment #2 on October 26, 1999,
and incorporated by reference.
<PAGE> 1
Exhibit d
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 27th day of October, 1999, by and between USALLIANZ
FUNDS, a Delaware business trust (the "Trust"), and Allianz of America, Inc., a
Delaware corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule A to this agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage the investment
and reinvestment of the assets of each Fund of the Trust in conformity with such
Fund's investment objectives and restrictions as may be set forth from time to
time in the Fund's then current prospectus and statement of additional
information, if any, and other governing documents, and to supervise the
provision of services to the Trust and each of its Funds by others, all subject
to the supervision of the Board of Trustees of the Trust, for the period and on
the terms set forth in this Agreement. The Adviser hereby accepts such
employment and agrees during such period, at its own expense, to render the
services and to assume the obligations set forth herein, for the compensation
provided herein. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule A, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and upon execution of an addendum hereto such Fund shall become a Fund hereunder
and the compensation payable to the Adviser by the new Fund will be as agreed in
writing at the time and set forth in such addendum.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act")) provided
to a Fund and/or other accounts over which the Adviser or an affiliate of the
Adviser exercises investment discretion. The Adviser is authorized to pay a
broker-dealer
<PAGE> 2
who provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. To the extent not otherwise arranged by the Trust pursuant to other
agreements for management, administration and/or other services, the Adviser, at
its own expense, shall furnish to the Trust office space in the offices of the
Adviser or in such other place as may be agreed upon by the parties from time to
time, all necessary office facilities, equipment and personnel in connection
with its services hereunder, and shall arrange, if desired by the Trust, for
members of the Adviser's organization to serve without salaries from the Trust
as officers or, as may be agreed from time to time, as agents of the Trust. The
Adviser assumes and shall pay or reimburse the Trust for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust affiliated with the Adviser or
any of its affiliates, and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(c) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(d) all charges and expenses for administration and management services
(except as otherwise specifically provided in Section 1(a) hereof;
(e) all charges and expenses for bookkeeping and auditors;
(f) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(g) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(h) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(i) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
2
<PAGE> 3
(j) all costs and expenses of shareholder servicing;
(k) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(l) all costs of certificates representing shares of the Trust or its
Funds;
(m) all fees and expenses involved in registering and maintaining
registrations of the Trust, its Funds and of their shares with the Securities
and Exchange Commission (the "Commission") and registering or qualifying the
Funds' shares under state or other securities laws, including, without
limitation, the preparation and printing of registration statements,
prospectuses, and statements of additional information for filing with the
Commission and other authorities;
(n) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(o) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(p) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds has herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(q) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(r) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule A for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable
3
<PAGE> 4
hereunder for the period ending with the date of such termination shall be
payable upon such termination. Amounts payable hereunder shall be promptly paid
when due.
The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds) to the extent that any Fund's expenses exceed such lower
expense limitation as the Adviser may, by notice to the Trust, voluntarily
declare to be effective.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate
to such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountants who shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of Allianz AG Holding or otherwise; that Directors,
officers and agents of the Adviser and its affiliates or stockholders of Allianz
AG Holding are or may be interested in the Trust or any Adviser as Trustees,
Directors, officers, shareholders or otherwise; that the Adviser (or any such
successor) is or may be interested in the Trust or any SubAdviser as
shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date if (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
4
<PAGE> 5
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of the affected Funds; and on sixty days' written notice to
the Trust, this Agreement may be terminated at any time without the payment of
any penalty by the Adviser. This Agreement shall automatically terminate upon
its assignment (as that term is defined in the 1940 Act). Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed postage
prepaid, to the other party at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to material amendments such execution by the Trust shall have
been first approved by the vote of the holders of a majority of the outstanding
voting securities of the affected Funds and by the vote of a majority of
Trustees of the Trust who are not interested persons (as that term is defined in
the 1940 Act) of the Adviser, or of the Trust, cast in person at a meeting
called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust or the affected Funds" shall have,
for all purposes of this Agreement, the meaning provided therefor in the 1940
Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The Trust acknowledges that the Adviser and its affiliates have
granted the Trust the non-exclusive right to use of the name "USAllianz Funds"
and agrees that all rights in and to such name and any and all service marks or
other intellectual property related thereto or associated therewith are and
remain the property of the Adviser and its affiliates. Without limiting the
generality of the foregoing, the Trust acknowledges that the Adviser and its
affiliates may withdraw the right to use such name and related intellectual
property by notice in writing to the Trust and upon receipt of such notice, the
Trust agrees to promptly take such steps as may be necessary to change its name
and/or the name of any Funds and to cease use of any intellectual property
belonging to the Adviser or its affiliates.
14. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of The State of Delaware.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
USALLIANZ FUNDS
By:/s/Brian K. Welker
-------------------------------
Name:
Title: Business Analyst
ALLIANZ OF AMERICA, INC.
By:/s/David P. Marks
-------------------------------
Name:
Title: Chief Investment Officer
<PAGE> 7
Schedule A
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Name of Fund Compensation
------------------------------------ -------------------
Diversified Assets Fund 0.55%
Global Opportunities Fund 0.95%
Growth Fund 0.75%
Fixed Income Fund 0.50%
Money Market Fund 0.35%
The advisory fee shall be accrued daily at the rate of 1/365th of the
applicable percentage applied to the daily net assets of each Fund. The advisory
fee so accrued shall be paid to the Adviser as provided in Section 4 of the
Investment Advisory Agreement.
<PAGE> 1
DISTRIBUTION AGREEMENT
AGREEMENT made this 27th day of October, 1999, between USALLIANZ
VARIABLE INSURANCE PRODUCTS TRUST (the "Company") and BISYS FUND SERVICES
LIMITED PARTNERSHIP D/B/A BISYS FUND SERVICES ("Distributor").
WHEREAS, the Company is an open-end management investment company,
organized as a Delaware business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of beneficial interest ("Shares") of each of the investment portfolios of
the Company (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Company then
in effect under the Securities Act of 1933, as amended (the "Securities Act").
As used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Company understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Investment Companies") including Companies having investment objectives similar
to those of the Company. The Company further understands that investors and
potential investors in the Company may invest in shares of such other Investment
Companies. The Company agrees that Distributor's duties to such Investment
Companies shall not be deemed in conflict with its duties to the Company under
this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable, which are primarily intended to result in
the sale of the Shares, including, but not limited to, advertising, compensation
of underwriters, dealers and sales personnel, the printing and
<PAGE> 2
mailing of prospectuses to other than current Shareholders, and the printing and
mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, all rules and regulations promulgated by the Commission thereunder
and all rules and regulations adopted by any securities association registered
under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Company.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Company's officers may decline to accept any orders for, or
make any sales of, the Shares until such time as those officers deem it
advisable to accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Company agrees at its own expense to execute any and
all documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Company shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Company
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Company shall also
furnish Distributor upon request with: (a) unaudited semi-annual financial
statements of the Funds prepared by the Company in accordance with Generally
Accepted Accounting Principles, consistently applied, (b) a monthly itemized
list of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Company represents to Distributor that, with respect
to the Shares, all registration statements and prospectuses filed by the Company
with the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and prospectus contain all
statements required to be stated therein in conformity with said Act and the
rules and regulations
2
<PAGE> 3
of said Commission and all statements of fact contained in any such registration
statement and prospectus are true and correct in all material respects.
Furthermore, neither any registration statement nor any prospectus includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
to a purchaser of the Shares. The Company may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Company's counsel, be
necessary or advisable. If the Company shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after receipt by
the Company of a written request from Distributor to do so, Distributor may, at
its option, terminate this Agreement. The Company shall not file any amendment
to any registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Company's right
to file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Company may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Company authorizes Distributor and dealers selected
by Distributor to use any prospectus in the form furnished from time to time in
connection with the sale of the Shares. The Company agrees to indemnify, defend
and hold Distributor, its several partners and employees, and any person who
controls Distributor within the meaning of Section 15 of the Securities Act free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith) which
Distributor, its partners and employees, or any such controlling person, may
incur under the Securities Act or under common law or otherwise, arising out of
or based upon any untrue statement, or alleged untrue statement, of a material
fact contained in any registration statement or any prospectus or arising out of
or based upon any omission, or alleged omission, to state a material fact
required to be stated in either any registration statement or any prospectus or
necessary to make the statements in either thereof not misleading; provided,
however, that the Company's agreement to indemnify Distributor, its partners or
employees, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations as are contained in any prospectus and in such financial and
other statements as are furnished in writing to the Company by Distributor and
used in the answers to the registration statement or in the corresponding
statements made in the prospectus, or arising out of or based upon any omission
or alleged omission to state a material fact in connection with the giving of
such information required to be stated in such answers or necessary to make the
answers not misleading; and further provided that the Company's agreement to
indemnify Distributor and the Company's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Company or its Shareholders to which Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
in the performance of its duties, or by reason of Distributor's reckless
disregard of its obligations and duties under this Agreement. The Company's
agreement to indemnify Distributor, its partners and employees and any such
controlling person, as aforesaid, is expressly conditioned upon the Company
being notified
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<PAGE> 4
of any action brought against Distributor, its partners or employees, or any
such controlling person, such notification to be given by letter or by telegram
addressed to the Company at its principal office in Columbus, Ohio and sent to
the Company by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served. The
failure to so notify the Company of any such action shall not relieve the
Company from any liability which the Company may have to the person against whom
such action is brought by reason of any such untrue, or allegedly untrue,
statement or omission, or alleged omission, otherwise than on account of the
Company's indemnity agreement contained in this paragraph 1.11. The Company will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Company and approved by Distributor,
which approval shall not be unreasonably withheld. In the event the Company
elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Company does not elect to assume the defense of any such suit,
or in case Distributor reasonably does not approve of counsel chosen by the
Company, the Company will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. The
Company's indemnification agreement contained in this paragraph 1.11 and the
Company's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Distributor, its partners and employees, or any controlling
person, and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Company agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Company or any of its
officers or Directors in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the
Company, its several officers and Trustees/Directors (hereinafter referred to as
"Directors") and any person who controls the Company within the meaning of
Section 15 of the Securities Act free and harmless from and against any and all
claims, demands, liabilities and expenses (including the costs of investigating
or defending such claims, demands, or liabilities and any counsel fees incurred
in connection therewith) which the Company, its officers or Directors or any
such controlling person, may incur under the Securities Act or under common law
or otherwise, but only to the extent that such liability or expense incurred by
the Company, its officers or Directors or such controlling person resulting from
such claims or demands, shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by Distributor to the Company and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Company required to be stated in such answers
or necessary to make such
4
<PAGE> 5
information not misleading. Distributor's agreement to indemnify the Company,
its officers and Directors, and any such controlling person, as aforesaid, is
expressly conditioned upon Distributor being notified of any action brought
against the Company, its officers or Directors, or any such controlling person,
such notification to be given by letter or telegram addressed to Distributor at
its principal office in Columbus, Ohio, and sent to Distributor by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. Distributor shall have the right of
first control of the defense of such action, with counsel of its own choosing,
satisfactory to the Company, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the
Company, its officers or Directors or such controlling person shall each have
the right to participate in the defense or preparation of the defense of any
such action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the
Company, its officers or Directors, or to such controlling person by reason of
any such untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of Distributor's indemnity agreement contained in this
paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the
Company under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Company if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.13 shall in any way restrict
or have an application to or bearing upon the Company's obligation to repurchase
Shares from any Shareholder in accordance with the provisions of the Company's
prospectus, Declaration of Trust/Articles of Incorporation, or Bylaws.
1.14 The Company agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for
amendments to the registration statement or
prospectus then in effect or for additional
information;
(b) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement
or prospectus then in effect or the
initiation by service of process on the
Company of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement of a material fact made
in the registration statement or prospectus
then in effect or which requires the making
of a change in such registration statement
or prospectus in order to make the
statements therein not misleading; and
5
<PAGE> 6
(d) of all action of the Commission with respect
to any amendment to any registration
statement or prospectus which may from time
to time be filed with the Commission.
For purposes of this section, informal requests by or
acts of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
1.15 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Company all records and other information relative to the Company and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Company.
1.16 This Agreement shall be governed by the laws of the State
of Ohio.
1.17 In the event Distributor purchases the initial shares of
the Company for purposes of satisfying the minimum net worth requirements set
forth in Section 14 (a) of the 1940 Act, and a notice of termination is
subsequently given or this Agreement is otherwise terminated pursuant to Section
6 herein for any reason prior to the time that organizational expenses incurred
by the Company have been fully amortized, then the Company shall either (i)
cause the successor distributor of the shares (the "Successor Distributor") to
pay to Distributor, within ten (10) days prior to the termination of this
Agreement, an amount of cash that is sufficient to purchase the initial shares
that are held by Distributor or (ii) enable Distributor to redeem the initial
shares of the Company that it holds by causing the Successor Distributor to
contribute to the Company, within ten (10) days prior to the termination of this
Agreement, any unamortized organizational costs in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of such contribution. In the latter case, Distributor
shall be entitled to redeem any or all of the initial shares that it holds and
receive redemption proceeds without any reduction in the amount of such
proceeds, prior to the termination of this Agreement.
1.18 Distributor represents that (i) it is and will be at all
times relevant to this Agreement a member in good standing of the National
Association of Securities Dealers, Inc. and (ii) it is and will be at all times
relevant to this Agremeent a broker-dealer properly registered and qualified
under all applicable federal, state and local laws to engage in the business and
transactions described in this Agreement. Distributor further represents that
(i) the execution, delivery and performance of this Agreement are within BISYS'
powers and (ii) this Agreement has been duly authorized by Distributor and, when
executed and delivered by Distributor, will constitute a legal, valid and
binding obligation of Distributor, enforceable against Distributor in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
6
<PAGE> 7
2. FEE.
Distributor shall be entitled to receive from the Company (i)
sales charges payable by Company Shareholders in accordance with each of the
Company's prospectuses, and (ii) distribution and/or service fees, in accordance
with distribution and shareholder service plans and any other service plans that
are adopted by the Company. The distribution and/or service fees shall be
accrued daily and shall be paid on the first business day of each month, or at
such time(s) as the Distributor shall reasonably request.
3. SALE AND PAYMENT.
Shares of a Fund may be subject to a sales load and may be
subject to the imposition of a distribution fee pursuant to the Distribution and
Shareholder Service Plan referred to above. To the extent that Shares of a Fund
are sold at an offering price which includes a sales load or at net asset value
subject to a contingent deferred sales load with respect to certain redemptions
(either within a single class of Shares or pursuant to two or more classes of
Shares), such Shares shall hereinafter be referred to collectively as "Load
Shares" (in the case of Shares that are sold with a front-end sales load or
Shares that are sold subject to a contingent deferred sales load), "Front-End
Load Shares" or "CDSL Shares" and individually as a "Load Share," a "Front-End
Load Share" or a "CDSL Share." A Fund that contains Front-End Load Shares shall
hereinafter be referred to collectively as "Load Funds" or "Front-End Load
Funds" and individually as a "Load Fund" or a "Front-end Load Fund." A Fund that
contains CDSL Shares shall hereinafter be referred to collectively as "Load
Funds" or "CDSL Funds" and individually as a "Load Fund" or a "CDSL Fund." Under
this Agreement, the following provisions shall apply with respect to the sale
of, and payment for, Load Shares.
3.1 Distributor shall have the right to purchase Load Shares
at their net asset value and to sell such Load Shares to the public against
orders therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in Boston or New York clearing
house funds equal to the applicable net asset value of such Shares. Distributor
may retain so much of any sales charge or underwriting discount as is not
allowed by Distributor as a concession to dealers.
7
<PAGE> 8
4. PUBLIC OFFERING PRICE.
The public offering price of a Load Share shall be the net
asset value of such Load Share, plus any applicable sales charge, all as set
forth in the current prospectus of the Load Fund. The net asset value of Shares
shall be determined in accordance with the provisions of the Declaration or
Trust/Articles of Incorporation and Bylaws of the Company and the then-current
prospectus of the Load Fund.
5. ISSUANCE OF SHARES.
The Company reserves the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Company or the Load Fund(s) with any other investment company or the
acquisition by the Company or the Load Fund(s) of all or substantially all of
the assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in the
nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Load Shares pursuant to any exchange and reinvestment
privileges described in any then-current prospectus of the Load Fund; and (e)
otherwise in accordance with any then-current prospectus of the Load Fund.
6. TERM, DURATION AND TERMINATION.
This Agreement shall become effective as of the date first
written above and, unless sooner terminated as provided herein, shall continue
for a two-year period following the effective date of this Agreement.
Thereafter, if not terminated, this Agreement shall continue with respect to a
particular Fund automatically for successive one-year terms, provided that such
continuance is specifically approved at least annually by (a) by the vote of a
majority of those members of the Company's Directors who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
for the purpose of voting on such approval and (b) by the vote of the Company's
Directors or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty days'
prior written notice, by the Company's Directors, by vote of a majority of the
outstanding voting securities of the Company or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST
By: /s/ David P. Marks
---------------------------------
Title: Chairman
------------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ ?????
---------------------------------
Title: President
------------------------------
9
<PAGE> 1
Exhibit e
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this _______ day of October, 1999, by and among
USAllianz Variable Insurance Products Trust (the "Trust"), an open-end
management investment company organized as a Delaware Business Trust, Allianz
Life Insurance Company of North America, a life insurance company organized as a
corporation under the laws of the State of Minnesota, (the "Company"), on its
own behalf and on behalf of each segregated asset account of the Company set
forth in Schedule A, as may be amended from time to time (the "Accounts"), and
BISYS Fund Services Limited Partnership, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the Company has registered or will register under the 1940 Act
certain variable life insurance policies and variable annuity contracts, set
forth in Schedule A, to be issued by the Company under which the Portfolios are
to be made as investment vehicles (the "Contracts);
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of the Portfolios indicated
on Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
-------------------------------------------------
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the
<PAGE> 2
Company notifies the Trust of such purchase orders and requests for redemption
by 9:30 a.m. Eastern time on the next following Business Day, as defined in
Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust ( or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under Federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
4:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day' shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Proceeds of redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire
to the Company by order of the Trust with the reasonable expectation of
receipt by the Company by 4:00 p.m. Eastern time on the next Business
Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market
conditions exist, but in no event shall payment be delayed for a
greater period than is permitted by the 1940 Act. The Trust reserves
the right to suspend the right of redemption, consistent with Section
22(3) of the 1940 Act and any rules thereunder.
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<PAGE> 3
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day. If the Trust
provides materially incorrect share net asset value information, the
number of shares purchased or redeemed shall be adjusted to reflect the
correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to
the Company.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as any
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts
170
<PAGE> 4
of interest corresponding materially to those contained in Section 2.9 and
Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
--------------------------
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the Company to
print together in one document the current prospectus for the Contracts
issued by the Company and the current prospectus for the Trust. The
Trust shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Contract owners, and
the Company shall bear the expense of printing copies of the Trust's
prospectus that are used in connection with offering the Contracts
issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners. The
Trust, at the Company's expense, shall provide the Company with copies
of its periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably request
for use in connection with offering the Contracts issued by the
Company. If requested by the Company in lieu thereof, the Trust shall
provide such documentation (including a final copy of
171
<PAGE> 5
the Trust's proxy materials, periodic reports to shareholders and other
communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company
to print such shareholder communications for distribution to Contract
owners.
2.6. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.7 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented
from time to time), annual and semi-annual reports of the Trust,
Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust
or the Distributor are not distributed to existing or prospective
Contract owners.
2.8. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.9. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus
172
<PAGE> 6
may be amended or supplemented from time to time), or in materials approved by
the Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to respond to
any request for approval on a prompt and timely basis.
2.10. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established by
the Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered Account
and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion. The Company reserves the right, to the extent permitted by
law, to vote shares held in any Account in its sole discretion.
2.11. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.12. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
2.13. The Company shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Contracts
issued by the Company, including registering each Account as an
investment company to the extent required under the 1940 Act, and
registering the Contracts or interests in the Accounts under the
Contracts to the extent required under the 1933 Act, and obtaining all
necessary approvals to offer the Contracts from state insurance
commissioners.
2.14. The Company shall make every effort to maintain the treatment of the
Contracts issued by the Company as annuity contracts or life insurance
173
<PAGE> 7
policies, whichever is appropriate, under applicable provisions of the
Code, and shall notify the Trust and the Distributor immediately upon
having a reasonable basis for believing that such Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.15. The Company shall offer and sell the Contracts issued by the Company in
accordance with the applicable provisions of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940
Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity
contracts.
2.16. The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933
Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and
state law.
2.17. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including,
without limitation, the SEC, the NASD, and state insurance regulators)
and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
ARTICLE III.
Representations and Warranties
------------------------------
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of
Minnesota and that it has legally and validly established each Account
as a segregated asset account under such law as of the date set forth
in Schedule A, and that NALAC Financial Plans LLC, the principal
underwriter for the Contracts, is registered as a broker-dealer under
the 1934 Act and is a member in good standing of the National
Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
174
<PAGE> 8
3.4. the Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act and the rules
and regulations thereunder.
3.5. The Trust represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act
and sold in accordance with all applicable federal and state laws, and
the Trust shall be registered under the 1940 Act prior to and at the
time of any issuance or sale of such shares. The Trust shall amend its
registration statement under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify its shares for sale in
accordance with the laws of the various states only if and to the
extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code", and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5), and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not so comply and will immediately take
all reasonable steps to adequately diversify the Portfolio to achieve
compliance within the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents and warrant that it is duly organized and
validly existing under the laws of the State of Ohio and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
175
<PAGE> 9
ARTICLE V
Indemnification
---------------
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article V), or arise out of or
are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified party if such
statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the Trust
for use in Company Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or
wrongful conduct of the company or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was
176
<PAGE> 10
made in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the Company;
or
(d) arise out of or result from any failure by the Company to provide
the services or furnish the materials required under the terms of
this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to the
Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of the
Company to provide such information on a timely basis.
5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" "or the purposes of this Section 5.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust Documents"
for the purposes of this Article V), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and was accurately derived from written
information furnished to the Distributor or the Trust by or on
behalf of the Company for use in Trust documents or otherwise for
use in connection with the sale of the Contracts or Trust shares;
or
177
<PAGE> 11
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the
Distributor or persons under its control, with respect to the sale
or acquisition of the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Company Documents or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Distributor; or
(d) arise out of or result from any failure by the Distributor to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Distributor.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that arise from such Indemnified Party's willful misfeasance, bad
faith or negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have
been served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service upon
or other notification to any designated agent), but failure to notify
the party from any liability which it may have to the Indemnified party
in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall he entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the
178
<PAGE> 12
party named in the action. After notice from the indemnifying party to
the Indemnified Party of an election to assume such defense, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the indemnifying party will not be liable
to the Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
ARTICLE VI.
Termination
-----------
6.1 This Agreement shall terminate:
(a) at the option of any party upon 6 months advance written notice to
the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code (unless
disqualification is caused by the Trust or the Distributor) or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority of
the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement or related to the sale of Trust shares or the
operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails to
meet the diversification requirements specified in Section 3.6
hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company, and
upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of the
Portfolio are not registered, issued or sold in accordance with
applicable state and/or federal law, or such law precludes the use
of such shares as the underlying investment media of the Variable
Contracts issued or to be issued by the Company; or
179
<PAGE> 13
(h) at the option of the Company, if the Portfolio fails to qualify as
a Regulated investment Company under Subchapter M of the Code: or
(i) at the option of the Distributor if it shall determine in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity.
(j) immediately, in the event the Distributor ceases, for any reason,
to act in the capacity of distributor for the Trust and its
shares.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V and all warranties under Article III shall
survive the termination of this Agreement, and the provisions of
Article IV and Section 2.9 shall survive the termination of this
Agreement as long as shares of the Trust are held on behalf of Contract
owners in accordance with Section 6.2.
ARTICLE VII.
Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Trust:
USAllianz Variable Insurance Products Trust
55 Greens Farms Road
Westport, CT 06881-5160
Attn: David P. Marks
President
If to the Distributor:
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
Attn: William J. Tomko
180
<PAGE> 14
If to the Company:
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
Attn: Thomas B. Clifford
Assistant Vice President
ARTICLE VIII.
Miscellaneous
-------------
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
181
<PAGE> 15
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without prior written approval of the other
party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and
year first above written.
BISYS Fund Service Limited Partnership
BISYSFund Services, Inc., its General Partner
By:
------------------------------------------
Name:
Title:
USAllianz Variable Insurance Products Trust
By:
------------------------------------------
Name:
Title:
Allianz Life Insurance Company of North America
By:
------------------------------------------
Name:
Title:
182
<PAGE> 1
Exhibit J
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
USAllianz Variable Insurance Products Trust:
We consent to the use of our report dated February 22, 2000 on the financial
statements of the USAllianz Variable Insurance Products Trust as incorporated
herein by reference and to the reference to our firm under the heading
"Financial Highlights" in the prospectus and "Independent Auditors" in the
statement of additional information.
KPMG LLP
Columbus, Ohio
April 6, 2000
<PAGE> 1
EXHIBIT m
DISTRIBUTION PLAN
for the
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
This DISTRIBUTION PLAN (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") by
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST, a Delaware business trust (the
"Trust"), individually and/or on behalf of its portfolios as set forth on
EXHIBIT A attached hereto (each a "Fund").
SECTION 1. This Plan is adopted pursuant to Rule 12b-1 under the 1940
Act so as to allow the Trust to make payments as contemplated herein in
conjunction with the distribution of shares of each Fund ("Shares").
SECTION 2. This Plan is designed to finance any activity which is
principally intended to result in the marketing or sale of Shares including,
without limitation, expenditures consisting of payments to a principal
underwriter of the Fund ("Distributor") or others for services provided or to be
provided. Amounts received by the Distributor and others may, additionally, be
used to cover certain other costs and expenses related to the distribution of
Shares and provision of service to Fund shareholders, including (i) advertising
by radio, television, newspapers, magazines, brochures, sales literature, direct
mail or any other form of advertising; (ii) expenses of sales employees or
agents of the Distributor, including salary, commissions, travel and related
expenses; (iii) costs of printing prospectuses and other materials to be given
or sent to prospective investors; and (iv) such other similar services as the
Trustees determine to be reasonably calculated to result in the sale of Shares.
SECTION 3. The maximum amount which each Fund may pay directly or
reimburse to the Distributor or others pursuant to Section 2 hereto shall be
such amount, expressed as a percentage of the Fund's average daily net assets
attributable to Shares of the Fund as set forth on EXHIBIT A attached hereto.
Appropriate adjustments shall be made to the payments made pursuant to Section 2
to the extent necessary to ensure that no payment is made with respect to the
Shares of the Fund in excess of the applicable limit imposed on asset based,
front end and deferred sales charges under subsection (d) of Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers, Inc.
SECTION 4. This Plan shall not take effect until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
related agreement ("Plan Trustees"), cast in person at a meeting called for the
purpose of voting on this Plan or such agreements.
SECTION 5. Unless sooner terminated pursuant to Section 7, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall
<PAGE> 2
continue in effect so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees and the Board
shall review at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
SECTION 7. This Plan may be terminated at any time with respect to any
Fund by vote of a majority of the Plan Trustees or by vote of a majority of such
Fund's outstanding Shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing and shall provide: (a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of the Plan Trustees
or by a vote of a majority of such Fund's outstanding Shares on not more than
sixty days written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 3 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 4 hereof.
SECTION 10. while this Plan shall be in effect, the selection and
nomination of the Trustees of the Trust shall be committed to the discretion of
the Trustees who are not "interested persons" of the Trust.
Effective Date: October __, 1999
<PAGE> 3
EXHIBIT A
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
Portfolios
- ----------
Diversified Assets Fund
Fixed Income Fund
Global Opportunities Fund
Growth Fund
Money Market Fund
Fees
- ----
0.25% per annum of the Fund's average daily net assets attributable to Shares of
the Fund
<PAGE> 1
EXHIBIT (p)(1)
USALLIANZ FUNDS
US ALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
CODE OF ETHICS
--------------
A. GENERAL PRINCIPLES
------------------
This Code of Ethics is based on the following principles:
1. Access Persons (as such term is hereinafter defined) owe a fiduciary
duty to, among others, the shareholders of the Fund to conduct their
personal transactions in Securities in a manner which neither
interferes with Fund portfolio transactions nor otherwise takes unfair
or inappropriate advantage of an Access Person's relationship to the
Fund.
2. In complying with this fiduciary duty, Access Persons owe shareholders
the highest duty of trust and fair dealing.
3. Access Persons must, in all instances, place the interests of the
shareholders of the Fund ahead of the Access Person's own personal
interests or the interests of others. For example, in order to avoid
the appearance of conflict from a personal transaction in a Security,
the failure to recommend that Security to, or the failure to purchase
that Security for, the Fund, may be considered a violation of this
Code.
Access Persons must adhere to these general fiduciary principles, as well as
comply with the specific provisions and Associated Procedures of this Code.
Technical compliance with the terms of this Code and the Associated Procedures
will NOT automatically insulate an Access Person from scrutiny in instances
where the personal transactions in a Security undertaken by such Access Person
show a pattern of abuse of such Access Person's fiduciary duty to the Fund and
its shareholders or a failure to adhere to these general fiduciary principles.
B. DEFINITIONS
-----------
"Fund" means each registered investment company named above which adopts this
Code and any series or portfolios of such Fund.
"Access Person" means any director, trustee, officer, managing general partner,
general partner, or Advisory Person of the Fund, and all relatives living within
the same household as such Access Person; provided, however, that any Access
Person who is an employee of the Fund's investment adviser, its principal
underwriter, or of any operating company that is an affiliate or subsidiary of
the Fund's investment adviser or principal underwriter, shall be subject to the
provisions and terms of such adviser's or underwriter's code of ethics, and
shall not be subject to this Code and its Associated Procedures.
The "1940 Act" means the Investment Company Act of 1940, as amended.
"Advisory Person" means (i) any employee of either the Fund or of any company in
a control relationship to the Fund (which would include any company that is an
affiliate or a
<PAGE> 2
subsidiary of the Fund's adviser), who, in connection with the employee's
regular functions or duties, makes, participates in, or normally obtains
information regarding the current purchases or sales of a Security by the Fund,
or whose functions relate to the making of any recommendations with respect to
such purchases or sales; and (ii) any natural person in a control relationship
to the Fund who normally obtains information concerning current recommendations
made to the Fund with regard to the purchases or sales of a Security.
"ASSOCIATED PROCEDURES" means those policies, procedures and/or statements that
have been adopted by the Fund, and which are designed to supplement this Code
and its provisions.
A Security is "BEING CONSIDERED FOR PURCHASE OR SALE" when a recommendation to
purchase or sell a Security has been made and communicated and, with respect to
the person making the recommendation, when such person seriously considers
making such a recommendation.
"BENEFICIAL OWNERSHIP" shall be interpreted in the same manner as it would be
in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership shall
apply to all Securities which an Access Person has or acquires. As a general
matter, an Access Person is regarded as having beneficial ownership of all
securities held in the name of: (a) a husband, wife or minor child; (b) a
relative (including in-laws) sharing the same house; (c) anyone else if the
Access Person: i. obtains benefits substantially equivalent to ownership of the
securities; ii. can obtain ownership of the securities immediately or at some
future time; or iii. can vote or dispose of the securities.
"COMPLIANCE OFFICER" is the person designated by the Fund to monitor overall
compliance with this Policy and to fulfill the individual functions attributed
to the Compliance Officer herein, including pre-clearance of personal Security
transactions.
"CONTROL" shall have the same meaning as that set forth in Section 2(a)(9) of
the 1940 Act.
"DISINTERESTED DIRECTOR" means a director or trustee of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of the
1940 Act and the rules and regulations thereunder.
"PURCHASE OR SALE OF A SECURITY" includes, inter alia, the writing of an option
to purchase or sell a Security.
"INVESTMENT PERSONNEL" include: Access Persons with direct responsibility and
authority to make investment decisions affecting the Fund (such as portfolio
managers); Access Persons who provide information and advice to such portfolio
managers (such as securities analysts); and Access Persons who assist in
executing investment decisions for the Fund (such as traders). As the context
requires, "Investment Personnel" may refer to one or more Access Persons.
2
<PAGE> 3
"SECURITY" shall have the meaning set forth in Section 2(a)(36) of the 1940 Act,
and shall include: equity and debt securities; options on and warrants to
purchase equity or debt securities; shares of closed-end investment companies;
and Related Securities.
"RELATED SECURITIES" are instruments and securities that are related to, but not
the same as, a Security. For example, a Related Security may be convertible into
a Security, or give its holder the right to purchase the Security.
For purposes of reporting, "Security" shall include futures contracts.
"SECURITY" SHALL NOT INCLUDE: securities issued by the Government of the United
States (including short term debt securities which are U.S. government
securities pursuant to Section 2(a)(16) of the 1940 Act); bankers' acceptances;
bank certificates of deposit; commercial paper; shares of registered open-end
investment companies; Standard & Poor's Depositary Receipts (ticker SPY),
DIAMONDS (ticker DIA), Nasdaq-100 Shares (ticker QQQ); Securities which are not
eligible for purchase or sale by the Fund and such other instruments as may be
determined by the Fund's Board of Directors from time to time.
"PUBLIC COMPANY" means any entity subject to the reporting requirements of the
Securities Exchange Act of 1934.
C. EXEMPTED TRANSACTIONS
---------------------
The prohibitions of Section D of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(b) Purchases or sales which are non-volitional on the part of either
the Access Person or the Fund, subject to the provisions of Section
D.6. of this Code;
(c) Purchases which are either: made solely with the dividend proceeds
received in a dividend reinvestment plan; or part of an automatic
payroll deduction plan, whereby an employee purchases securities
issued by an employer; or
(d) Purchases effected upon the exercise of rights issued by an issuer
PRO RATA to all holders of a class of its Securities, to the extent
such rights were acquired from such issuer, and any sales of such
rights so acquired.
D. PROHIBITED TRANSACTIONS AND ACTIVITIES
--------------------------------------
1. SECURITIES PURCHASED OR SOLD BY THE FUND: No Access Person shall
purchase or sell, directly or indirectly, any Security in which he or
she has, or by reason of such transaction acquires, a direct or
indirect beneficial ownership interest and which he or she knows, or
should have known, at the time of such purchase or sale:
(a) is being considered for purchase or sale by the Fund; or
(b) is being purchased or sold by the Fund.
3
<PAGE> 4
2. INITIAL PUBLIC OFFERINGS: All Access Persons are prohibited from
acquiring any Security distributed in an initial public offering until
trading of the Security commences in the secondary market.
3. PRIVATE PLACEMENTS: All Access Persons are prohibited from acquiring
Securities for their personal accounts in a private placement made by
an issuer that is a Public Company, without the express prior approval
of the Compliance Officer (or his designee).
In instances where an Investment Personnel, after receiving prior
approval, acquires a Security in a private placement, the Investment
Personnel has an affirmative obligation to disclose this investment to
the Compliance Officer (or his designee) if the Investment Personnel
participates in any subsequent consideration of any potential
investment, by the Fund, in the issuer of those Securities. The Fund's
decision to purchase Securities of such an issuer (following a purchase
by an Investment Personnel in an approved personal transaction) will be
subject to an independent review by the Compliance Officer, or his
designee, so long as the person conducting such review has no personal
interest in the issuer.
4. PRE-CLEARANCE: All Access Persons are prohibited from executing a
personal transaction in any Security (including transactions in pension
or profit-sharing plans in which the Access Person has a beneficial
interest), without express prior approval of the Compliance Officer in
accordance with the Associated Procedures governing pre-clearance.
A purchase or sale of Securities not otherwise approved pursuant to the
Associated Procedures may, upon request made prior to the personal
transaction, nevertheless receive the approval of the Compliance
Officer if such purchase or sale would be: only remotely potentially
harmful to the Fund; very unlikely to affect a highly institutional
market; or clearly not related economically to the securities to be
purchased, sold or held by the Fund.
Notwithstanding the receipt of express prior approval, any purchases or
sales by Access Persons undertaken in reliance on this provision remain
subject to the prohibitions enumerated in Sections D.5. and 6. of this
Code.
5. BLACKOUT PERIODS: All Access Persons are prohibited from executing a
personal transaction in any Security on a day during which the Fund has
a pending "buy" or "sell" order for that Security, until the Fund's
order is either executed or withdrawn.
All Investment Personnel are prohibited from purchasing or selling any
Security within four (4) trading days before and after the Fund
purchases or sells the same Security.
Transactions undertaken in violation of these prohibitions will either
be required to be unwound, or any profits realized by an Access Person
on any personal transactions in Securities within the proscribed
periods (either undertaken while the Fund has an open order, or within
the 4-trading-day blackout period) will be required to be disgorged (to
an entity designated by the Compliance Officer (or his
4
<PAGE> 5
designee), and the Access Person or Investment Personnel will be subject to
disciplinary action, as determined by the Compliance Officer and/or the Fund's
Board of Directors.
6. SHORT-TERM TRADING: All Access Persons are prohibited from profiting in
the purchase and sale, or sale and purchase, of the same (or
equivalent) Securities within 30 calendar days.
Transactions undertaken in violation of this prohibition will either be
required to be unwound, or any profits realized on such short-term
trades will be required to be disgorged.
For purposes of this prohibition, each personal transaction in the
Security will begin a new 30-calendar-day period. As an illustration,
if an Access Person purchases 1000 shares of Omega Corporation on June
1st, 500 shares on July 1st, and 250 shares on August 1st, the profit
from the sale of the 1000 shares purchased on June 1st is prohibited
for any transaction prior to September 1st (i.e., 30 calendar days
following August 1st).
In circumstances where a personal transaction in Securities within the
proscribed period is involuntary (for example, due to unforeseen
corporate activity, such as a merger), the Access Person must notify
the Compliance Officer.
In circumstances where an Access Person can document personal
exigencies, the Compliance Officer may grant an exemption from the
prohibition of profiting in the purchase and sale, or sale and
purchase, of the same (or equivalent) Securities within 30 calendar
days. Such an exemption is wholly within the discretion of the
Compliance Officer, and any request for such an exemption will be
evaluated on the basis of the facts of the particular situation.
7. PERSONAL BENEFIT: Inducing or causing the Fund to take action, or to
fail to take action, for the purpose of achieving a personal benefit,
rather than to benefit the Fund, is a violation of this Code. Examples
of this would include causing the Fund to purchase a Security owned by
the Access Person for the purpose of supporting or driving up the price
of the Security, and causing the Fund to refrain from selling a
Security in an attempt to protect the value of the Access Person's
investment, such as an outstanding option.
8. TRADING ON MARKET IMPACT OF FUND TRANSACTIONS: Using knowledge of the
Fund's portfolio transactions to profit by the market effect of such
transactions is a violation of this Code. This prohibition will be
monitored, in part, through a review of the Securities transactions of
Access Persons with an eye toward any discernable patterns. It is
important to note, however, that a violation could result from a single
transaction if the circumstances warrant a finding that the principles
in Section A of this Code have been violated.
9. GIFTS FROM ISSUERS AND BROKER-DEALERS: All Investment Personnel are
prohibited from receiving any gift, favor, preferential treatment,
valuable consideration, or other thing of more than a de minimis value
in any year from any person or entity
5
<PAGE> 6
from, to or through whom the Fund purchases or sells Securities, or an issuer of
Securities. For purposes of this Code, "de minimis value" is equal to $100 or
less.
10. SERVICE ON PUBLIC COMPANY BOARDS OF DIRECTORS: All Investment Personnel
are prohibited from serving on the boards of directors of any Public
Company, absent express prior authorization from the Compliance
Officer.
Authorization to serve on the board of a Public Company may be granted
in instances where the Compliance Officer determines that such board
service would be consistent with the interests of the Fund and its
shareholders. If prior approval to serve as a director of a Public
Company is granted, an Investment Personnel has an affirmative duty to
recuse himself from participating in any deliberations by the Fund
regarding possible investments in the securities issued by the Public
Company on whose board the Investment Personnel sits.
11. DISINTERESTED DIRECTORS: Notwithstanding the other restrictions of this
Code to which Disinterested directors are subject, only subparagraphs
1, 7 and 8 of this Section D apply to such Disinterested Directors.
E. REPORTING
---------
1. QUARTERLY TRANSACTION AND ACCOUNT REPORTS: Every Access Person shall
report to the Fund, not later than 10 calendar days after the end of
the calendar quarter, the following information with respect to
transactions during that calendar quarter (other than those personal
transactions in Securities exempted under Section C of this Code) in
any Security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership:
(a) the date of the transaction, the title and the number of
shares, and the principal amount of each Security involved;
(b) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(c) the price at which the transaction was effected;
(d) he name of the broker, dealer or bank through whom the
transaction was effected; and
(e) if there were no personal transactions in Securities during
the period, either a statement to that effect or the word
"None" (or some similar designation).
In addition, with respect to any account in which securities were held
during the quarter for the direct or indirect benefit of an Access
Person, the following information shall be provided:
(a) the name of the broker, dealer or bank with whom the Access
Person established the account;
6
<PAGE> 7
(b) the date the account was established; and
(c) the date that the report is submitted by the access person.
2. DUPLICATE CONFIRMATIONS AND ACCOUNT STATEMENTS: Every Access Person is
required to direct his or her broker to forward to the Compliance
Officer, on a timely basis, duplicate copies of both confirmations of
all personal transactions in Securities effected for any account in
which such Access Person has any direct or indirect beneficial
ownership interest and periodic statements relating to any such
account.
3. INITIAL HOLDINGS REPORT: Within 10 calendar days of becoming an Access
Person, each Access Person shall submit to the Fund the following
information:
(a) the title, number of shares and principal amount of each
Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person;
(b) the name of the broker, dealer or bank with whom the Access
Person maintained any account in which any securities were
held for the direct or indirect benefit of the Access Person
as of the date the person became an Access Person; and
(c) the date that the report is submitted by the Access Person.
4. ANNUAL HOLDINGS REPORT: Within 10 calendar days of the end of the year,
each Access Person shall submit to the Fund the following information
(which must be current as of a date no more than 10 days before the
report is submitted):
(a) the title, number of shares and principal amount of each
Security in which the Access Person had any direct or indirect
beneficial ownership;
(b) the name of the broker, dealer or bank with whom the Access
Person maintains any account in which any securities are held
for the direct or indirect benefit of the Access Person; and
(c) the date that the report is submitted by the Access Person.
5. REPORT OF GIFTS: Any Access Person who receives any gift, favor,
preferential treatment, valuable consideration or other thing of value
of more than de minimis value in any year from any person or entity
that does business either with or on behalf of the Fund (including an
issuer of Securities or any entity or person through whom the Fund
purchases or sells Securities) is required to report the receipt of
such gift to the Compliance Officer. This reporting requirement shall
not apply to:
(a) salaries, wages, fees or other compensation paid, or expenses
paid or reimbursed, in the usual scope of an Access Person's
employment responsibilities for the Access Person's employer;
7
<PAGE> 8
(b) the acceptance of meals, refreshments or entertainment of
reasonable value in the course of a meeting or other occasion,
the purpose of which is to hold bona fide business
discussions;
(c) the acceptance of advertising or promotional material of
nominal value, such as pens, pencils, note pads, key chains,
calendars and similar items;
(d) the acceptance of gifts, meals, refreshments, or entertainment
of reasonable value that are related to commonly recognized
events or occasions, such as a promotion, new job, Christmas,
or other recognized holiday; or
(e) the acceptance of awards, from an employer to an employee, for
recognition of service and accomplishment.
6. ANNUAL CERTIFICATION OF COMPLIANCE: All Access Persons are required, on
an annual basis, to certify that they have received, read, and
understand the provisions of this Code, and that they recognize that
they are subject to its provisions. Such certification shall also
include a statement that the Access Person has complied with the
requirements of this Code and that the Access Person has disclosed or
reported all personal transactions in and holdings of Securities that
are required to be disclosed or reported pursuant to the requirements
of this Code.
7. DISINTERESTED DIRECTORS: A Disinterested director shall be exempt from
the initial and annual reporting requirements contained in this
Section. He or she shall also be exempt from the quarterly transaction
reporting requirement so long as at the time of the personal
transaction in the Security, the Disinterested director neither knew,
nor, in the ordinary course of fulfilling his or her official duties as
a director of the Fund, should have known that during the 15-day period
immediately preceding or following the date of the transaction in the
Security by the Disinterested director, the Security was purchased or
sold by the Fund, or considered for purchase or sale.
F. REVIEW OF REPORTS
-----------------
The quarterly transaction reports and initial and annual holdings
reports required under Section D of this Code shall be reviewed by the
Compliance Officer for conflicts of interest and potential violations
of this Code. Any such conflicts and potential violations shall be
brought to the attention of the individual involved and shall be
addressed as appropriate.
G. ANNUAL ISSUES AND CERTIFICATION REPORT TO FUND'S BOARD OF DIRECTORS
-------------------------------------------------------------------
At least annually, the Fund, its investment adviser and its principal
underwriter will submit a written report to the Fund's Board of
Directors that:
(a) describes any issues arising under this Code or any revisions
or additions to the Associated Procedures that have been made
since the last report;
(b) provides information about material violations of the Code or
Associated Procedures and any sanctions imposed in response to
such violations; and
8
<PAGE> 9
(c) certifies that the Fund, investment adviser or principal
underwriter, as appropriate, has adopted procedures reasonably
necessary to prevent Access Persons from violating this Code.
H. SANCTIONS
---------
Upon discovering a violation of this Code (or, in certain instances, its
Associated Procedures), the Board of Directors of the Fund may take such actions
or impose such sanctions, if any, as it deems appropriate, including, inter
alia, a letter of censure or suspension, a fine, or a recommendation of the
termination of the employment of the violator. (In instances where the violation
is committed by a member of the Access Person's household, any sanction would be
imposed on the Access Person.) The filing of any false, incomplete or untimely
reports, as required by Section E of this Code, may in certain circumstances be
considered a violation of this Code.
9
<PAGE> 10
USALLIANZ FUNDS
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST
ASSOCIATED PROCEDURES FOR CODE OF ETHICS
----------------------------------------
1. IDENTIFICATION/NOTIFICATION OF ACCESS PERSONS: The Compliance Officer
will identify all Access Persons who are required to file reports
pursuant to Section E of the Code of Ethics ("the Code") and will
inform such persons of their reporting obligations.
2. PRE-CLEARANCE OF SECURITY TRANSACTIONS:
(a) The Code requires that Access persons request pre-clearance
from the Compliance Officer for every non-exempted personal
securities transaction. Pre-clearance may be requested either
orally or via email or other written communication.
(b) The Compliance Officer will determine whether a transaction
involving the particular issuer's securities would violate the
principles or prohibitions in the Code, will communicate his
or her determination to the Access Person via email or other
written communication and will retain the email or other
written communication as documentation of the clearance
request and his or her response.
(c) If the Compliance Officer is not available, the pre-clearance
request will be handled by his or her designee. The individual
handling the request then will inform the Compliance Officer
of the pre-clearance via email or other written communication.
(d) All pre-cleared transactions must be completed by the end of
the trading day on which clearance is obtained. If the
transaction is not completed within this time, a new
pre-clearance must be obtained in accordance with these
procedures. The Compliance Officer may grant an exception to
the same-day trade requirement upon his or her determination
that it is consistent with the principles underlying the Code.
(e) The Compliance Officer will maintain, for five years after the
end of the year in which the record is created, a record of
every transaction for which he or she has provided
pre-clearance in accordance with these procedures.
3. REVIEW OF QUARTERLY TRANSACTION REPORTS AND INITIAL AND ANNUAL HOLDINGS
REPORTS: THE COMPLIANCE OFFICER WILL:
(a) utilize the Portia system (or other computerized system then
in use) to produce find trading information in a format that
facilitates review and comparison with the monthly and
quarterly transaction reports and initial and annual holdings
reports submitted by Access Persons;
(b) perform the above-referenced review within a reasonably short
time of receiving each group of transaction reports and
holdings reports;
<PAGE> 11
(c) follow-up with respect to any potential violations of the Code
that are identified during his or her reviews; and
(d) document in writing the resolution of any potential violations
and any imposition of sanctions.
4. RECORDKEEPING: In addition to the pre-clearance records required to be
kept in Section 2(e) above, the following records will be maintained
for at least five years after the end of the year in which the report
is made or the record created:
(a) A copy of each Code in effect at any time within the past five
years;
(b) A record of any violation of the Code and of any action taken
as a result of the violation;
(c) A copy of each quarterly transaction report, initial holdings
report and annual holdings report made by any Access Person
with such reports to be maintained in an easily accessible
place for the first two years;
(d) A record of all persons, currently or within the past five
years, who are or were required to make quarterly transaction
reports, initial holdings reports or annual holdings reports;
(e) A record of all persons, currently or within the past five
years, who are or were required to review the reports set
forth in subparagraph (d) above; and
(f) A copy of the Annual Issues and Certification Report furnished
pursuant to Section G of the Code.
2
<PAGE> 12
ALLIANZ OF AMERICA, INC.
CODE OF CONDUCT
---------------
JANUARY 1 , 2000
----------------
GENERAL PRINCIPLES
------------------
This Code of Conduct is based on the principle that all Allianz of America, Inc.
(AzOA) employees owe a fiduciary duty to AzOA's clients. In light of this
fiduciary duty, you should conduct yourself in all circumstances in accordance
with the following general principles:
1. You must at all times place the interests of AzOA's clients before your
own interests.
2. You must conduct all of your personal investment transactions
consistent with this Code and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of your position of
trust and responsibility.
3. You should adhere to the fundamental standard that investment advisory
personnel should not take inappropriate advantage of their positions to
their personal benefit.
The effectiveness of AzOA's policies regarding ethics depends on the judgement
and integrity of its employees rather than on any set of written rules. If you
are uncertain as to whether an actual or potential conflict exists in any
particular situation between your interests and those of AzOA's clients, please
consult AzOA's Compliance Officer or AzOA's Chief Investment Officer
immediately.
All information obtained under this Code of Conduct will be kept in strict
confidence, except that reports of securities transactions and holdings will be
made available, when specifically requested, to the United States Securities and
Exchange Commission and any other regulatory or oversight organization which
has jurisdiction over the operation of AzOA. Please note that review of personal
securities transactions by the Securities and Exchange Commission is conducted
periodically. In addition, AzOA's Compliance Officer will review all personal
investment transaction and holdings reports to detect conflicts of interest and
abusive practices.
ANY AzOA EMPLOYEE WHO DOES NOT OBSERVE THE POLICIES ESTABLISHED BY THIS CODE OF
CONDUCT MAY BE SUBJECT TO SERIOUS DISCIPLINARY ACTION, INCLUDING TERMINATION OF
EMPLOYMENT.
Page 3 of 13
<PAGE> 13
PERSONAL INVESTMENT TRANSACTIONS POLICY
---------------------------------------
Laws and ethical standards impose on AzOA and its employees duties to avoid
conflicts of interest between their personal investment transactions and
transactions AzOA makes on behalf of its clients. The policies enumerated below
are designed to reduce the possibilities for such conflicts and or inappropriate
appearances, while at the same time preserving reasonable flexibility and
privacy in personal securities transactions.
UNLESS OTHERWISE NOTED, AzOA'S RESTRICTIONS ON PERSONAL INVESTMENT TRANSACTIONS
APPLY TO ALL ACCESS PERSONS. EACH AzOA EMPLOYEE SHOULD CONSIDER HIMSELF OR
HERSELF AN ACCESS PERSON UNLESS INSTRUCTED OTHERWISE.
VIOLATIONS OF AzOA'S PERSONAL INVESTMENT TRANSACTIONS POLICY MAY REQUIRE
REVERSAL OF THE UNAUTHORIZED TRANSACTION AND ANY RESULTING PROFITS MAY BE
SUBJECT TO DISGORGEMENT. AzOA RESERVES THE RIGHT TO REQUEST ORIGINAL BROKERAGE
ACCOUNT STATEMENTS AND ORIGINAL TRADE CONFIRMATIONS FOR PURPOSES OF CONFIRMING
EMPLOYEE REPORTING OF PERSONAL SECURITIES TRANSACTIONS.
Each Access Person must:
1. OBTAIN PRECLEARANCE FROM AzOA'S COMPLIANCE OFFICER FOR ANY NON-EXEMPTED
PERSONAL SECURITY TRANSACTION IF THE ACCESS PERSON HAS, OR AS A RESULT
OF THE TRANSACTION ACQUIRES, ANY DIRECT OR INDIRECT BENEFICIAL
OWNERSHIP IN THE SECURITY.
In the event AzOA's Compliance Officer is not available, preclearance
for equity securities must be obtained from AzOA's Senior Managing
Director Equity and, for fixed income securities, preclearance must be
obtained from AzOA's Senior Managing Director Fixed Income.
Preclearance is not required for the following exempted securities:
a. U.S. Government Securities.
b. Bank Certificates of Deposit.
e. Bankers' Acceptances.
d. Commercial Paper.
e. Shares in open-end mutual funds.
f. Standard & Poor's Depositary Receipts (ticker SPY), DIAMONDS
(ticker DIA), and NASDAQ-100 Shares (ticker QQQ).
g. Securities purchased on behalf of an Access Person for an
account over which the Access Person has no direct or indirect
influence or control of the transactions.
h. Securities purchased through stock dividends, automatic
dividend reinvestment, stock splits, mergers, consolidations
or spin-offs.
i. Acquisition of securities through gifts or bequests.
Page 4 of 13
<PAGE> 14
j. Security purchases effected upon the exercise of rights issued
by the issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such
issuer, and sales of such rights so acquired.
An Access Person is regarded as having a beneficial ownership in
securities held in the name of:
a. A husband, wife or minor child;
b. A relative sharing the same house;
c. Anyone else if the Access Person:
(1) obtains benefits substantially equivalent to ownership of
the securities;
(2) can obtain ownership of the securities immediately or at
some future time; or
(3) can vote or dispose of the securities.
Effective March 31, 2000, AzOA employees are prohibited from personally
managing any Third Party Accounts other than for members of the
employee's immediate family. Immediate family includes the employee's
spouse, children, parents and siblings but excludes nieces and nephews.
TRADING RESTRICTIONS:
a. BLACKOUT PERIOD - Access Persons will not be granted
permission to trade a security within four trading days before
or after the date AzOA trades in the same security.
b. SHORT-TERM TRADING - Access Persons will not be granted
permission to profit from the purchase and sale, or sale and
purchase of the same (or equivalent) securities within 30
calendar days. Each access person should note that this
prohibition could limit the attractiveness of options trading
and short sales of securities and could make legitimate
hedging activities less available.
c. INITIAL PUBLIC OFFERINGS - Access Persons are not permitted to
acquire any non-exempt security in an initial public
offering.
d. ALLIANZ AG RESTRICTED LIST - Access Persons are not permitted
to trade a security listed on the Allianz AG Restricted List.
e. PRIVATE PLACEMENTS - Access Persons will not be granted
permission to invest in a private placement until he or she
has obtained the written, prior approval of AzOA's Chief
Investment Officer, AzOA's Senior Managing Director Equity, or
AzOA's Senior Managing Director Fixed Income. Access Persons
who obtain approval must disclose their investment if they
participate in any subsequent decision of AzOA to invest in
the same issuer. If neither the Chief Investment Officer,
Senior Managing Director Equity or Senior Managing Director
Fixed
Page 5 of 13
<PAGE> 15
Income are disinterested parties with respect to the proposed
investment, the Chief Investment Officer shall appoint an
independent person to evaluate the proposed investment for
approval.
2. COMPLETE A PRECLEARED PERSONAL SECURITIES TRANSACTION BY THE END OF THE
BUSINESS DAY THAT PRECLEARANCE IS OBTAINED. IF THE TRANSACTION IS NOT
COMPLETED WITHIN THIS TIME REQUIREMENT, A NEW PRECLEARANCE MUST BE
OBTAINED AS DETAILED ABOVE.
3. ON A QUARTERLY BASIS, EACH ACCESS PERSON MUST FILE A PERSONAL
SECURITIES TRANSACTION REPORT WITH AzOA'S COMPLIANCE OFFICER NO LATER
THAN 10 CALENDAR DAYS AFTER THE END OF EACH QUARTER (I.E. ON OR BEFORE
THE 10TH DAY OF JANUARY, APRIL, JULY AND OCTOBER).
In each quarterly report (Attachment 1), the Access Person must report
all personal investment transactions, other than the exempted
securities listed in item 1 above, in which he or she has a beneficial
interest and which were transacted during the quarter. Every Access
Person must file a quarterly report when due even if such person made
no purchases or sales of securities during the period covered by the
report.
Access Persons MAY CHOOSE to file Personal Securities Transactions
Reports on a monthly basis (Attachment 2) but are under no legal or
AzOA requirement to do so. The minimum standard for Access Persons is
quarterly reporting of all personal investment transactions, other than
the exempted securities listed in item 1 above, in which he or she has
a beneficial interest and which were transacted during the quarter.
4. ON AN ANNUAL BASIS, EACH ACCESS PERSON MUST FILE AN ANNUAL PERSONAL
SECURITIES HOLDINGS REPORT (ATTACHMENT 3) WITH AzOA'S COMPLIANCE
OFFICER NO LATER THAN 10 CALENDAR DAYS AFTER CALENDAR YEAR-END (I.E. ON
OR BEFORE JANUARY 10). This annual report should list all securities,
other than the exempted securities listed in item 1 above, in which the
Access Person had a beneficial interest as of December 31 of the
preceding year.
5. EACH NEW ACCESS PERSON MUST FILE AN INITIAL PERSONAL SECURITIES
HOLDINGS REPORT (ATTACHMENT 4) WITH AzOA'S COMPLIANCE OFFICER NO LATER
THAN 10 CALENDAR DAYS AFTER HE OR SHE BECOMES AN ACCESS PERSON.
INSIDER TRADING POLICY
----------------------
It is illegal for a person who is in possession of material non-public
information about any public company (commonly known as "inside information")
to trade in the company's securities. It is also illegal for that person to
recommend a trade in the company's securities or tell someone else the inside
information who in turn may then trade in the company's securities (commonly
known as "tipping"). Trading or tipping
Page 6 of 13
<PAGE> 16
based on inside information may be subject to serious penalties,
including substantial fines and imprisonment.
The definition of material information is subjective. Generally it is
information that would affect an investor's decision to buy, sell, or
hold securities. Examples are: (i) a pending acquisition or
divestiture, (ii) financial results that are better or worse than
recent trends would lead someone to expect, (iii) an increase or
decrease in dividends or (iv) a stock split. Non-public information is
information that has not been effectively communicated to the
marketplace.
Everyone must remember that inside information can be obtained from
AzOA's activities. For instance, knowledge that AzOA is about to make a
substantial investment in or enter into material transactions with
another company is inside information about that company. Inside
information about other companies, such as securities brokerages, can
also be obtained in the course of AzOA's business dealings with these
companies. Accordingly, no AzOA employee may trade or tip if they
possess inside information.
GIFT POLICY
-----------
No AzOA employee should accept gifts of more than de minimis value from
present or prospective clients, providers of goods or services or
others with which AzOA has dealings. If you have any question as to the
appropriate definition of "de minimis value" as it applies to an
offered gift, you should consult AzOA's Compliance Officer immediately.
The term "gift" includes, but is not limited to, substantial favors,
money, credit, special discounts on goods or services, free services,
loans of goods or money, excessive entertainment events, trips, hotel
expenses, food or beverages, or anything else of value. Gifts to an
employees immediate family are included in this policy. Under no
circumstances should cash gifts by accepted by any AzOA employee.
If you believe the rejection or return of a gift would damage friendly
relations between a third party and AzOA, you should discuss the gift
with AzOA's Compliance Officer, who may require that the gift be
donated to charity.
It is acceptable for AzOA employees to give gifts or favors of nominal
value to the extent they are appropriate and suitable under the
circumstances, meet the standards of ethical business conduct, and
involve no element of concealement.
OUTSIDE ACTIVITIES POLICY
-------------------------
No Access Person shall serve as a director of a publicly held company
unless authorized to do so by AzOA's Chief Investment Officer. No
person serving as a director shall have
Page 7 of 13
<PAGE> 17
access to any information obtained or investment decisions made by AzOA
relating to the company on which the person serves.
No Access Person may receive compensation, remuneration or other
benefits from anyone other than AzOA or its affiliates for providing
investment advice, counseling or other related activities.
COMMUNICATIONS POLICY
---------------------
AzOA's Compliance Officer is designated as the primary spokesperson for
all contacts with the various regulatory bodies that monitor the
activities of AzOA. All inquiries, correspondence, etc. should be
cleared through the Compliance Officer in advance of any contact.
Direct initiation of contact with any regulatory body by an AzOA
employee without the prior approval of the Compliance Officer will be a
violation of our Code of Conduct. This, however, does not prohibit the
direct contact of regulatory bodies by an employee to report an act of
fraud or a violation of the law.
Page 8 of 13
<PAGE> 18
ACKNOWLEDGEMENT OF
------------------
YEAR 2000 CODE OF CONDUCT
-------------------------
I have received, read and understand AzOA's Year 2000 Code of Conduct and agree
to comply with all Code policies. I understand that this Code of Conduct is
taken very seriously by Allianz of America, Inc. and that my failure to observe
its standards and requirements could result in serious disciplinary action
against me, including termination of my employment.
- ------------------------------------------------------------------
Print Name Signature Date
Page 9 of 13
<PAGE> 19
ATTACHMENT 1
PERSONAL SECURITIES TRANSACTION REPORT
For the Quarter Ended ___/___/2000
ALLIANZ OF AMERICA, INC. - ACCESS PERSONS
Name ______________________ Signature _______________________ Date ___________
<TABLE>
<CAPTION>
TRADE BOUGHT/ SECURITY NUMBER PRICE
DATE SOLD NAME/DESCRIPTION OF UNITS BROKER & ACCOUNT # BUY/SELL
<S> <C> <C> <C> <C> <C>
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
</TABLE>
- - You must preclear all trades with AzOA's Compliance Officer BEFORE execution.
- - If you had no reportable transactions, state "NONE" on this form.
- - This form should be received by AzOA's Compliance Officer NO LATER THAN 10
CALENDAR DAYS AFTER QUARTER-END.
Page 10 of 13
<PAGE> 20
ATTACHMENT 2
PERSONAL SECURITIES TRANSACTION REPORT
For the Quarter Ended ___/___/2000
ALLIANZ OF AMERICA, INC. - ACCESS PERSONS
Name ______________________ Signature _______________________ Date ___________
<TABLE>
<CAPTION>
TRADE BOUGHT/ SECURITY NUMBER PRICE
DATE SOLD NAME/DESCRIPTION OF UNITS BROKER & ACCOUNT # BUY/SELL
<S> <C> <C> <C> <C> <C>
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
_____ ______ ______________________________ ________ __________________ ________
</TABLE>
- - You must preclear all trades with AzOA's Compliance Officer BEFORE execution.
- - If you had no reportable transactions, state "NONE" on this form.
- - This form should be received by AzOA's Compliance Officer NO LATER THAN 10
CALENDAR DAYS AFTER QUARTER-END.
Page 11 of 13
<PAGE> 21
ATTACHMENT 3
ANNUAL PERSONAL SECURITIES HOLDINGS REPORT
For the Year Ended DECEMBER 31, 1999
ALLIANZ OF AMERICA, INC. - ACCESS PERSONS
Name ______________________ Signature _______________________ Date ___________
BROKER/DEALER FIRM NAME ACCOUNT #
________________________ _____________
SECURITY NUMBER OF SECURITY NUMBER OF
NAME/DESCRIPTION UNITS NAME/DESCRIPTION UNITS
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
- - You must preclear all trades with AzOA's Compliance Officer BEFORE execution.
- - If you had no reportable holdings, state "NONE" on this form.
- - This form should be received by AzOA's Compliance Officer NO LATER THAN
JANAURY 10, 2000.
<PAGE> 22
ATTACHMENT 4
INTIAL PERSONAL SECURITIES HOLDINGS REPORT
As of your date of hire by AzOA ___/___/2000
ALLIANZ OF AMERICA, INC. - NEW ACCESS PERSONS
Name ______________________ Signature _______________________ Date ___________
BROKER/DEALER FIRM NAME ACCOUNT #
________________________ _____________
SECURITY NUMBER OF SECURITY NUMBER OF
NAME/DESCRIPTION UNITS NAME/DESCRIPTION UNITS
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
______________________ __________ ________________________ __________
- - You must preclear all trades with AzOA's Compliance Officer BEFORE execution.
- - If you had no reportable holdings, state "NONE" on this form.
- - This form should be received by AzOA's Compliance Officer NO LATER THAN 10
CALENDAR DAYS AFTER BEING HIRED BY AzOA.
<PAGE> 23
ALLIANZ OF AMERICA, INC.
ASSOCIATED PROCEDURES FOR CODE OF CONDUCT
1. IDENTIFICATION/NOTIFICATION OF ACCESS PERSONS: The Compliance Officer
will identify all Access Persons who are required to file reports
pursuant to the Code of Conduct ("the Code") and will inform such
persons of their reporting obligations.
2. PRE-CLEARANCE OF SECURITIES TRANSACTIONS:
(a) The Code requires that Access persons request pre-clearance
from AzOA's Compliance Officer for every non-exempted personal
securities transaction. Pre-clearance may be requested either
orally or via email or other written communication.
(b) The Compliance Officer will determine whether a transaction
involving the particular issuer's securities would violate the
principles or prohibitions in the Code, will communicate his
or her determination to the Access Person via email or other
written communication and will retain the email or other
written communication as documentation of the clearance
request and his or her response.
(c) If the Compliance Officer is not available, pre-clearance
requests for equity trades will be handled by the Senior
Managing Director, Equity, and for fixed income trades, the
Senior Managing Director, Fixed Income. The Manager handling
the request or the equity trader then will inform the
Compliance Officer of the pre-clearance via email or other
written communication.
(d) All pre-cleared transactions must be completed by the end of
the trading day on which clearance is obtained. If the
transaction is not completed within this time, a new
pre-clearance must be obtained in accordance with these
procedures. The Compliance Officer may grant an exception to
the same-day trade requirement upon his or her determination
that it is consistent with the principles underlying the Code.
(e) The Compliance Officer will maintain, for five years after the
end of the year in which the record is created, a record of
every transaction for which he or she has provided
pre-clearance in accordance with these procedures.
3. REVIEW OF QUARTERLY TRANSACTION REPORTS AND INITIAL AND ANNUAL HOLDINGS
REPORTS:
The Compliance Officer will:
(a) utilize the Portia system (or other computerized system then
in use) to produce advisory client trading information in a
format that facilitates review and comparison with the monthly
and quarterly transaction reports and initial and annual
holdings reports submitted by Access Persons;
<PAGE> 24
(b) perform the above-referenced review within a reasonably short
time of receiving each group of transaction reports and
holdings reports;
(c) follow-up with respect to any potential violations of the Code
that are identified during his or her reviews; and
(d) document in writing the resolution of any potential violations
and any imposition of sanctions.
4. ANNUAL ISSUES AND CERTIFICATION REPORT: On an annual basis, the
Compliance Officer will submit to the board of directors of every U.S.
registered mutual fund for which Alliance of America, Inc. ("AzOA")
serves as an investment adviser, a written report setting forth the
following:
(a) a description of any compliance or enforcement issues arising
under AzOA's Code of Conduct during the past year, including
but not limited to, information about material violations of
the Code and sanctions imposed in response thereto; and
(b) a certification that AzOA has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code.
The first Annual Issues and Certification Report shall be submitted to
the board of directors for each fund for which AzOA serves as
investment adviser by August 31, 2000.
5. RECORDKEEPING: In addition to the pre-clearance records required to be
kept in Section 2(d) above, the following records will be maintained
for at least five years after the end of the year in which the report
is made or the record created:
(a) A copy of each Code in effect at any time within the past five
years;
(b) A record of any violation of the Code and of any action taken
as a result of the violation;
(c) A copy of each monthly transaction report, quarterly
transaction report, initial holdings report and annual
holdings report made by any Access Person with such reports to
be maintained in an easily accessible place for the first two
years;
(d) A record of all persons, currently or within the past five
years, who are or were required to make quarterly transaction
reports, initial holdings reports or annual holdings reports;
(e) A record of all persons, currently or within the past five
years, who are or were required to review the reports set
forth in subparagraph (d) above pursuant to paragraph 3 above;
and
(f) A copy of each Annual Issues and Certification Report
furnished pursuant to paragraph 4 above.
2
<PAGE> 25
CERTIFICATION OF ALLIANZ OF AMERICA, INC.
AS TO ITS CODE OF CONDUCT AND ASSOCIATED
PROCEDURES
Allianz of America, Inc. ("AzOA") hereby certifies that it has adopted
and implemented the attached Code of Conduct and Associated Procedures and that
the Associated Procedures are reasonably designed to prevent Access Persons from
violating AzOA's Code of Conduct.
/s/Brian K. Welker
-----------------------------------
Brian K. Welker, Compliance Officer
Dated: February 8, 2000
<PAGE> 26
BISYS FUND SERVICES
-------------------
CODE OF ETHICS
--------------
1. INTRODUCTION
This Code of Ethics (the "Code") sets forth the basic policies of
ethical conduct for all directors, officers and associates (hereinafter referred
to as "Covered Persons") of the BISYS Fund Services companies listed on Exhibit
A hereto (hereinafter collectively referred to as "BISYS").
Rule 17j-l(b) under the Investment Company Act of 1940, as amended,
(the "1940 Act") makes it unlawful for BISYS companies operating as a principal
underwriter of a registered investment company (hereinafter referred to
individually as a "Fund" or collectively as the "Funds"), or any affiliated
person of such principal underwriter, in connection with the purchase or sale by
such person of a security "HELD OR TO BE ACQUIRED" (1) by any Fund:
(1) to employ any device, scheme or artifice to defraud the Fund;
(2) to make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order
to make the statements made, in light of the circumstances
under which they are made, not misleading;
(3) to engage in any act, practice or course of business that
operates or would operate as a fraud or deceit upon the Fund;
or
(4) to engage in any manipulative practice with respect to the
Fund.
Any violation of this provision by a Covered Person shall be deemed to
be a violation of this Code.
II. RISKS OF NON-COMPLIANCE
Any violation of this Code may result in the imposition by BISYS of
sanctions against the Covered Person, or may be grounds for the immediate
termination of the Covered Person's position with BISYS. In addition, in some
cases (e.g., the misuse of inside information), a violation of federal and
state civil and criminal statutes may subject the Covered Person to fines,
imprisonment and/or monetary damages.
- ------------------------------
(1) A security "HELD OR TO BE ACQUIRED" is defined under Rule 17j-1(a)(10) as
any COVERED SECURITY which, within the most recent fifteen (15) days: (A) is or
has been held by a Fund, or (B) is being or has been considered by a Fund or the
investment adviser for a Fund for purchase by the Fund. A purchase or sale
includes the writing of an option to purchase or sell and any security that is
convertible into or exchangeable for, any security that is held or to be
acquired by a Fund. "COVERED SECURITIES", as defined under Rule 17j-1 (a)(4), DO
NOT INCLUDE: (i) securities issued by the United States Government; (ii)
bankers' acceptances, bank certificates of deposit, commercial paper and high
quality short-term debt instruments, including repurchase agreements; (iii)
shares of open-end investment companies; (iv) transactions which you had no
direct or indirect influence or control; (v) transactions that are not
initiated, or directed, by you; and (vi) securities acquired upon the exercise
of rights issued by the issuer to all shareholders pro rata.
<PAGE> 27
III. ETHICAL STANDARDS
The foundation of this Code consists of basic standards of conduct
including, but not limited to, the avoidance of conflicts between personal
interests and interests of BISYS or its Fund clients. To this end, Covered
Persons should understand and adhere to the following ethical standards:
(a) THE DUTY AT ALL TIMES TO PLACE THE INTERESTS OF FUND
SHAREHOLDERS FIRST;
This duty requires that all Covered Persons avoid serving
their own personal interests ahead of the interests of the
shareholders of any Fund for which BISYS serves as the
administrator, distributor, transfer agent or fund accountant.
(b) THE DUTY TO ENSURE THAT ALL PERSONAL SECURITIES TRANSACTIONS
BE CONDUCTED IN A MANNER THAT IS CONSISTENT WITH THIS CODE TO
AVOID ANY ACTUAL OR POTENTIAL CONFLICT OF INTEREST OR ANY
ABUSE OF SUCH COVERED PERSON'S POSITION OF TRUST AND
RESPONSIBILITY; AND
Covered Persons should study this Code and ensure that they
understand its requirements. Covered Persons should conduct
their activities in a manner that not only achieves technical
compliance with this Code but also abides by its spirit and
principles.
(c) THE DUTY TO ENSURE THAT COVERED PERSONS DO NOT TAKE
INAPPROPRIATE ADVANTAGE OF THEIR POSITION WITH BISYS.
Covered Persons engaged in personal securities transactions
should not take inappropriate advantage of their position or
of information obtained during the course of their association
with BISYS. Covered Persons should avoid situations that
might compromise their judgment (e.g., the receipt of
perquisites, gifts of more than de minimis value or unusual
investment opportunities from persons doing or seeking to do
business with BISYS or the Funds).
A "PERSONAL SECURITIES TRANSACTION" is considered to be a
transaction in a Covered Security of which the Covered Person
is deemed to have "BENEFICIAL OWNERSHIP." (2) This includes,
but is not limited to, transactions in accounts of the Covered
Person's spouse, minor children, or other relations residing
in the Covered Person's household, or accounts in which the
Covered Person has discretionary investment control.
IV. RESTRICTIONS AND PROCEDURES
- -------------------------------
(2) "BENEFICIAL OWNERSHIP" of a security is defined under Rule 16a-1 (a)(2) of
the Securities Exchange Act of 1934, which provides that a Covered Person should
consider himself/herself the beneficial owner of securities held by his/her
spouse, his/her minor children, a relative who shares his/her home, or other
persons, directly or indirectly, if by reason of any contract, understanding,
relationship, agreement or other arrangement, he/she obtains from such
securities benefits substantially equivalent to those of ownership. He/she
should also consider himself/herself the beneficial owner of securities if
he/she can vest or revest title in himself/herself now or in the future.
2
<PAGE> 28
This section is divided into two (2) parts. Part A relates to
restrictions and procedures applicable to all Covered Persons in addition to the
aforementioned Rule 17j-l(b) provisions. Part B imposes additional restrictions
and reporting requirements for those Covered Persons who are listed on Exhibit B
hereto (hereinafter referred to as "Access Persons" (3)).
A. - RESTRICTIONS AND PROCEDURES FOR ALL COVERED PERSONS:
1. Prohibition Against Use of Material Inside Information
------------------------------------------------------
Covered Persons may have access to information about Funds
that is confidential and not available to the general public,
such as (but not limited to) information concerning securities
held in, or traded by, Fund portfolios, information concerning
certain underwritings of broker/dealers affiliated with a Fund
that may be deemed to be "MATERIAL INSIDE INFORMATION", and
information which involves a merger or acquisition that has
not been disclosed to the public.
"MATERIAL INSIDE INFORMATION" IS DEFINED AS ANY INFORMATION
ABOUT A COMPANY WHICH HAS NOT BEEN DISCLOSED TO THE GENERAL
PUBLIC AND WHICH EITHER A REASONABLE PERSON WOULD DEEM TO BE
IMPORTANT IN MAKING AN INVESTMENT DECISION OR THE
DISSEMINATION OF WHICH IS LIKELY TO IMPACT THE MARKET PRICE OF
THE COMPANY'S SECURITIES.
Covered Persons in possession of material inside information
must not trade in or recommend the purchase or sale of the
securities concerned until the information has been properly
disclosed and disseminated to the public.
2. Initial and Annual Certifications
---------------------------------
Within ten (10) days following the commencement of their
employment or otherwise becoming subject to this Code and at
least annually following the end of the calendar year, all
Covered Persons shall be required to sign and submit to the
Code Compliance Officer a written certification, in the form
of Exhibit C hereto, affirming that he/she has read and
understands this Code to which he/she is subject. In addition,
the Covered Person must certify annually that he/she has
complied with the requirements of this Code and has disclosed
and reported all personal securities transactions that are
required to be disclosed and reported by this Code. The Code
- -------------------------------
(3)An "ACCESS PERSON" is defined under Rule 17j-1 (a)(1)(ii) to include any
director, officer or general partner of a principal underwriter for a Fund who,
in the ordinary course of business, makes, participates in or OBTAINS
INFORMATION regarding the purchase or sale of securities for such Fund or whose
functions or duties in the ordinary course of business relate to the making of
any recommendation to such Fund regarding the purchase or sale of securities.
This Code has included BISYS associates that are not directors, officers or
general partners of any BISYS Fund Services company but would otherwise be
deemed Access Persons for purposes of this Code.
3
<PAGE> 29
Compliance Officer will circulate the Annual Certifications and
Holdings Reports for completion following the end of each calendar
year.
B. RESTRICTIONS AND REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS:
Each Access Person must refrain from engaging in a PERSONAL SECURITIES
TRANSACTION when the Access Person knows, or in the ordinary course of
fulfilling his/her duties would have reason to know, that at the time
of the personal securities transaction a Fund has a pending buy or sell
order in the same Covered Security.
1. INITIAL AND ANNUAL HOLDINGS REPORTS
All Access Persons must file a completed Initial and Annual Holdings
Report, in the form of Exhibit D hereto, with the Code Compliance
Officer WITHIN TEN (10) DAYS OF COMMENCEMENT OF THEIR EMPLOYMENT OR
OTHERWISE BECOMING SUBJECT TO THIS CODE AND THEREAFTER ON AN ANNUAL
BASIS FOLLOWING THE END OF THE CALENDAR YEAR IN ACCORDANCE WITH
PROCEDURES ESTABLISHED BY THE CODE COMPLIANCE OFFICER.
2. TRANSACTION/NEW ACCOUNT REPORTS
All Access Persons must file a completed Transaction/New Account
Report, in the form of Exhibit E hereto, with the Code Compliance
Officer WITHIN TEN (10) DAYS AFTER (i) OPENING AN ACCOUNT WITH A
BROKER, DEALER OR BANK IN WHICH COVERED SECURITIES ARE HELD; OR (ii)
ENTERING INTO ANY PERSONAL SECURITIES TRANSACTION IN WHICH AN ACCESS
PERSON HAS ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP. Personal
securities transactions are those involving any COVERED SECURITY (1) in
which the person has, or by reason of such personal securities
transaction acquires, any direct or indirect, "BENEFICIAL OWNERSHIP."
(2)
3. CONFIRMATIONS AND STATEMENTS
In order to provide BISYS with information to determine whether the
provisions of this Code are being observed, each Access Person shall
direct his/her broker, dealer or bank to supply to the Code Compliance
Officer, on a timely basis, duplicate copies of confirmations of all
personal securities transactions and copies of monthly statements for
all Covered Securities accounts. The confirmations should match the
Transaction/New Account Reports. These confirmations and statements
should be mailed, on a confidential basis, to the Code Compliance
Officer at the following address:
4
<PAGE> 30
ATTN: Code Compliance Officer
Regulatory Services
BISYS Fund Services
3435 Stelzer Road, Suite 1000
Columbus, Ohio 43219-8001
C. REVIEW OF REPORTS AND ASSESSMENT OF CODE ADEQUACY:
The Code Compliance Officer shall review and maintain the Initial and
Annual Certifications, Initial and Annual Holdings Reports and
Transaction/New Account Reports (the "Reports") with the records of
BISYS. Following receipt of the Reports, the Code Compliance Officer
shall consider in accordance with Procedures designed to prevent Access
Persons from violating this Code:
(a) whether any personal securities transaction evidences an
apparent violation of this Code; and
(b) whether any apparent violation of the reporting requirement
has occurred pursuant to Section B above.
Upon making a determination that a violation of this Code, including
its reporting requirements, has occurred, the Code Compliance Officer
shall report such violations to the General Counsel of BISYS Fund
Services who shall determine what sanctions, if any, should be
recommended to be taken by BISYS. The Code Compliance Officer shall
prepare quarterly reports to be presented to the Fund Boards of
Directors/Trustees with respect to any material trading violations
under this Code.
This Code, a copy of all Reports referenced herein, any reports of
violations, and lists of all Covered and Access Persons required to
make Reports, shall be preserved for the period(s) required by Rule
17j-1. BISYS shall review the adequacy of the Code and the operation of
its related Procedures at least once a year.
V. REPORTS TO FUND BOARDS OF DIRECTORS/TRUSTEES
BISYS shall submit the following reports to the Board of
Directors/Trustees for each Fund for which it serves as principal underwriter:
A. BISYS FUND SERVICES CODE OF ETHICS
A copy of this Code shall be submitted to the Board of each
Fund no later than September 1, 2000 or for new Fund clients,
prior to BISYS commencing operations as principal underwriter,
for review and approval. Thereafter, all material changes to
this Code shall be submitted to each Board for review and
approval not later than six (6) months following the date of
implementation of such material changes.
5
<PAGE> 31
B. ANNUAL CERTIFICATION OF ADEQUACY
The Code Compliance Officer shall annually prepare a written report to
be presented to the Board of each Fund detailing the following:
1. Any issues arising under this Code or its related Procedures
since the preceding report, including information about
material violations of this Code or its related Procedures and
sanctions imposed in response to such material violations; and
2. A Certification to Fund Boards, in the form of Exhibit F
hereto, that BISYS has adopted Procedures designed to be
reasonably necessary to prevent Access Persons from violating
this Code.
6
<PAGE> 32
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT A
The following companies are subject to the BISYS Fund Services Code of
Ethics(1):
Barr Rosenberg Funds Distributor, Inc.
BISYS Fund Services, Inc.
BISYS Fund Services Limited Partnership
BISYS Fund Services Ohio, Inc.
BNY Hamilton Distributors, Inc.
CFD Fund Distributors, Inc.
Centura Funds Distributor, Inc.
Concord Financial Group, Inc.
Kent Funds Distributors, Inc.
Evergreen Distributor, Inc.
IBJ Funds Distributor, Inc.
Mentor Distributors, LLC
The One Group Services Company
Performance Funds Distributor, Inc.
VISTA Fund Distributors, Inc.
- --------------------------------
(1) The companies listed on this Exhibit A may be amended from time to time, as
required.
AS OF JANUARY 11, 2000
A-1
<PAGE> 33
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT B
The following Covered Persons are considered Access Persons under the BISYS Fund
Services Code of Ethics(1):
Client Services - all associates
CFD Fund Distributors, Inc. - all directors, officers and employees
Directors/Officers of each BISYS entity listed on Exhibit A that met the
statutory definition of Access Person under Rule l7j-1
Financial Services (Fund Accounting and Financial Administration) - all
associates
Fund Administration - all associates
Information Systems - all associates
Legal Services - all paralegals and attorneys
The One Group Services Company - all directors, officers and employees
Tax Services - all associates
VISTA Fund Distributors, Inc.- all officers, directors and employees
All wholesalers and telewholesalers employed by the BISYS companies listed on
Exhibit A
- --------------------------------
(1) The Access Persons listed on this Exhibit B may be amended from time to
time, as required.
AS OF JANUARY 11, 2000
B-1
<PAGE> 34
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT C
INITIAL AND ANNUAL CERTIFICATIONS
I hereby certify that I have read and thoroughly understand and agree
to abide by the conditions set forth in the BISYS Fund Services Code of Ethics.
I further certify that, during the time of my affiliation with BISYS, I will
comply or have complied with the requirements of this Code and will
disclose/report or have disclosed/reported all personal securities transactions
required to be disclosed/reported by the Code.
If I am deemed to be an Access Person under this Code, I certify that I
will comply or have complied with the Transaction/New Account Report
requirements as detailed in the Code and submit herewith my Initial and Annual
Holdings Report. I further certify that I will direct or have directed each
broker, dealer or bank with whom I have an account or accounts to send to the
BISYS Code Compliance Officer duplicate copies of all confirmations and
statements relating to my account(s).
______________________________________
Print or Type Name
______________________________________
Signature
______________________________________
Date
C-1
<PAGE> 35
BISYS FUND SERVICES
CODE OF ETHICS
EXHIBIT D
INITIAL AND ANNUAL HOLDINGS REPORT
NAME AND ADDRESS OF ACCOUNT NUMBER(S) IF NEW ACCOUNTS
BROKER, DEALER OR BANK(S) DATE ESTABLISHED
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
_________________________________ _________________ ________________
ATTACHED ARE THE COVERED SECURITIES BENEFICIALLY OWNED BY ME AS OF THE DATE OF
THIS INITIAL AND ANNUAL HOLDINGS REPORT.
__________________________________
Print or Type Name
__________________________________
Signature
__________________________________
Date
D-1
<PAGE> 36
SECURITY NUMBER OF PRINCIPAL AMOUNT
DESCRIPTION COVERED
(Symbol/CUSIP) SECURITIES/
SHARES HELD
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
___________________________ ______________ _________________
D-2
<PAGE> 37
BISYS FUND SERVICES CODE OF ETHICS - TRANSACTION/NEW ACCOUNT REPORT
EXHIBIT E
I hereby certify that the Covered Securities described below (or
attached hereto in the annual statement from my broker, dealer or bank) were
purchased or sold on the date(s) indicated. Such Covered Securities were
purchased or sold in reliance upon public information lawfully obtained by me
through independent research. I have also listed below the account number(s)
for any new account(s) opened in which Covered Securities are held. My decision
to enter into any personal securities transaction(s) was not based upon
information obtained as a result of my affiliation with BISYS.
COVERED SECURITIES PURCHASED/ACQUIRED OR SOLD/DISPOSED
<TABLE>
<CAPTION>
Security Trade Number of Per Share Principal Interest Maturity Name of Broker Dealer Bought (B) or
Description Date Shares Price Amount Rate Rate or Bank (and Account Number Sold (S)
(Symbol/CUSIP) (If Applicable) (If Applicable) and Date Established, If New)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
______________ ____ _________ _________ _________ ______________ ______________ _____________________________ ____________
</TABLE>
This Transaction/New Account Report is not an Admission that you have
or had any direct or indirect beneficial ownership in the Covered Securities
listed above.
_____________________________
Print or Type Name
_____________________________ ______________________
Signature Date
E-1
