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USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST
GROWTH FUND
GLOBAL OPPORTUNITIES FUND
FIXED INCOME FUND
MONEY MARKET FUND
DIVERSIFIED ASSETS FUND
PROSPECTUS
OCTOBER 27, 1999
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
Carefully review this 3 Growth Fund
important section, which 5 Global Opportunities Fund
summarizes each fund's 7 Fixed Income Fund
investments and risks. 9 Money Market Fund
10 Diversified Assets Fund
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Review this section for 12 Growth Fund
specific information on each 13 Global Opportunities Fund
fund's investment, 15 Fixed Income Fund
strategies and risks. 17 Money Market Fund
18 Diversified Assets Fund
20 Other Considerations
20 Year 2000
FUND MANAGEMENT
Review this section for 22 The Investment Adviser
details on the people and 22 Portfolio Managers
organizations who oversee 23 Adviser's Prior Performance
the funds. 24 The Administrator and Distributor
SHAREHOLDER INFORMATION
Review this section for 25 Pricing of Fund Shares
details on how shares are 25 Purchase and Redemption of Shares
valued, how to purchase, 26 Distribution (12b-1) Fees
sell and exchange shares, 26 Dividends, Distributions and Taxes
related charges and payments
of dividends and
distributions.
BACK COVER
Where to Learn More About USAllianz VIP Funds
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RISK/RETURN SUMMARY
USALLIANZ VIP FUNDS
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" describes each Fund's objectives, principal investment strategies,
principal investment risks and certain performance information. Additional
information about the Funds can be found by referring to pages 12-21 further
back in the Prospectus. Please be sure to read the more complete descriptions
of the Funds' risks following this summary before you invest. The Funds are
managed by Allianz of America, Inc. (the "Adviser").
GROWTH FUND
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT The Fund normally invests at least 80% of its total assets
STRATEGIES in equity securities, which include 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. securities
market. Although the Fund invests primarily in equity
securities of larger capitalization companies, the Fund is
not limited to such investments and may invest in companies
with varying market capitalizations.
The Adviser uses a fundamental "bottom-up" approach to
selecting securities for investment. Factors considered
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 its judgment, will outperform 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.
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RISK/RETURN SUMMARY
GROWTH FUND
CONTINUED
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PRINCIPAL INVESTMENT RISKS The principal risks of investing in the Fund are:
- Market Risk. This is the risk that the value of the Fund's
investments will fluctuate as the stock or bond markets
fluctuate and that prices overall will decline over short
or long-term periods.
- Selection Risk. This is the risk 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.
- You may lose money by investing in the Fund.
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 is a new Fund for which performance information is not
yet available.
The net asset value ("NAV") of the Fund will fluctuate with
market conditions.
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RISK/RETURN SUMMARY
GLOBAL OPPORTUNITIES FUND
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INVESTMENT OBJECTIVE Long-term growth of capital.
PRINCIPAL INVESTMENT Under normal circumstances, the Fund invests at least 80% of
STRATEGIES its total assets in equity securities of U.S. and foreign
companies. Although the Fund invests primarily in equity
securities of larger capitalization companies, the Fund is
not limited to such investments and may invest in companies
with varying market capitalizations. The Adviser organizes
its research of equity securities into seven
internally-defined sectors based on global economic or
industry themes. These sectors include companies in the
natural resources, life style, financial, high technology,
telemedia, life science and transportation businesses. The
Fund may be overweighted or underweighted in a particular
sector or country relative to the Fund's benchmark, the MSCI
World Equity Index. 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 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
investments which, in the Adviser's judgment, will
outperform the average for companies included in the MSCI
World Equity Index.
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.
PRINCIPAL INVESTMENT RISKS The principal risks that apply to the Fund are:
- Market Risk. This is the risk that the value of the Fund's
investments will fluctuate as the stock or bond markets
fluctuate and that prices overall will decline over short
or long-term periods.
- Foreign Risk. This is the risk of investments in issuers
located in foreign countries, which may have greater price
volatility and less liquidity. Investments in foreign
securities also are subject to political, regulatory, and
diplomatic risks. Changes in currency rates are an
additional risk of investments in foreign securities.
- Selection Risk. This is the risk that poor security
selection will cause the Fund to underperform other funds
with similar investment objectives.
- You may lose money by investing in the Fund.
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RISK/RETURN SUMMARY
GLOBAL OPPORTUNITIES FUND
CONTINUED
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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 is a new Fund for which performance information is not
yet available.
The NAV of the Fund will fluctuate with market conditions.
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RISK/RETURN SUMMARY
FIXED INCOME FUND
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INVESTMENT OBJECTIVE To maximize total return with secondary emphasis on income.
PRINCIPAL INVESTMENT The Fund primarily invests in U.S. dollar denominated fixed
STRATEGIES income securities.
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 Fund will normally invest in government bonds,
investment grade corporate bonds, mortgage-backed
securities, asset-backed securities and municipal securities
and may invest in non-investment grade corporate bonds but
does not presently intend to do so. Under normal conditions,
the Fund intends to hold securities (other than money market
securities) with maturities 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. Individual
securities are bought and sold based on fundamental analysis
of the structural features of specific securities, current
market price and estimated future value, and the credit
quality of its issuer.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in the Fund are:
- 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.
- 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.
- Credit Risk. This is the risk that the issuer of a
security will be unable or unwilling to make timely payments
of interest or principal, or to otherwise honor its
obligations.
- Selection Risk. This is the risk that poor security
selection will cause the Fund to underperform other funds
with similar investment objectives.
- 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. Prepayment
exposes the Fund to the risk of lower return upon
subsequent reinvestment of the principal.
- You may lose money by investing in the Fund.
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RISK/RETURN SUMMARY
FIXED INCOME FUND
CONTINUED
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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 is a new Fund for which performance information is not
yet available.
The NAV of the Fund will fluctuate with market conditions.
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RISK/RETURN SUMMARY
MONEY MARKET FUND
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INVESTMENT OBJECTIVE Current income consistent with stability of principal.
PRINCIPAL INVESTMENT The Fund invests primarily in high quality, U.S.
STRATEGIES 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 Adviser
evaluates investments based on credit analysis and interest
rate outlook.
As a money market fund, the Fund is subject to strict
federal requirements which restrict the Fund's investments
to high-quality securities, limit the average maturity of
the portfolio to 90 days or less, and limit the maturity of
any security to no more than 397 days.
PRINCIPAL INVESTMENT RISKS Investors in the Fund should also be aware of the following
risks:
- 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. This is the risk that the issuer of a
security will be unable or unwilling to make timely payments
of interest or principal, or to otherwise honor its
obligations.
- 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.
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 This is a new Fund for which performance information is not
yet available.
The yield of the Fund will fluctuate with market conditions.
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RISK/RETURN SUMMARY
DIVERSIFIED ASSETS FUND
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INVESTMENT OBJECTIVE Total return consistent with reduction of long-term
volatility.
PRINCIPAL INVESTMENT The Fund pursues its objective through asset allocation and
STRATEGIES 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.
The Adviser uses a portfolio management team approach which
manages each asset class in accordance with the following
criteria:
- 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 (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.
- 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 the
two highest short-term rating categories of at least two
rating agencies or will be unrated securities of
comparable quality.
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RISK/RETURN SUMMARY
DIVERSIFIED ASSETS FUND
CONTINUED
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The Fund seeks to exceed the total return of a blended
benchmark consisting of 65% of the Lehman Intermediate
Government/Corporate Bond Index, 25% of the S&P 500(R) Index
and 10% of the 90-day Treasury Bill. The Fund typically
sells securities when the Advisor determines that such
securities would no longer meet its criteria for purchase or
when alternative investments become more attractive.
PRINCIPAL INVESTMENT RISKS The principal risks of investing in the Fund are:
- Market Risk. This is the risk that the value of the Fund's
investments will fluctuate as the stock or bond markets
fluctuate and that prices overall will decline over short
or long-term periods.
- Selection Risk. This is the risk 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.
- Credit Risk. This is the risk that the issuer of a
security will be unable or unwilling to make timely payments
of interest or principal, or to otherwise honor its
obligations.
- 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.
- You may lose money by investing in the Fund.
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 is a new Fund for which performance information is not
yet available.
The NAV of the Fund will fluctuate with market conditions.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
This section of the Prospectus provides descriptions of the Funds'
objectives, risks, strategies and investments. Other strategies and
investments not described below may be found in the Funds' Statement of
Additional Information (SAI).
GROWTH FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES: The Fund's
investment objective is long-term growth of capital, which objective may not
be changed without shareholder approval. 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 S&P 500(R) Index. (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.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
GLOBAL OPPORTUNITIES FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES: The Fund's
investment objective is long-term growth of capital, which objective may not
be changed without shareholder approval. 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 chemical
companies).
- Transportation. Innovative and solution-driven companies engaged in the
business of transportation on either a regional or global basis.
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
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
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.
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:
- 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.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
FIXED INCOME FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES: The Fund's
investment objective is to maximize total return with secondary emphasis on
income, which objective may not 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.
Although it does not presently intend to do so, 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 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".)
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.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
FIXED INCOME FUND
CONTINUED
- 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. 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.
- 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.
- 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.
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.
- The Fund has authority to invest up to 20% of its assets in high yield,
high risk debt securities. These lower quality securities have
speculative characteristics and are more volatile and are more subject to
credit risk than investment grade securities. High yield securities tend
to be more susceptible to high interest rates and to real or perceived
adverse economic and competitive industry conditions.
16
<PAGE> 17
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MONEY MARKET FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND The Fund's investment objective is current income consistent
PRINCIPAL INVESTMENT with stability of principal, which objective may not be
STRATEGIES changed 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 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 requirements which include the following:
- 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.
</TABLE>
17
<PAGE> 18
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
DIVERSIFIED ASSETS FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES: The Fund's
investment objective is total return consistent with reduction of long-term
volatility, which objective may not be 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 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 although it does not presently intend to do so.
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.
- 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".)
18
<PAGE> 19
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
DIVERSIFIED ASSETS FUND
CONTINUED
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. Credit risk is somewhat minimized by the Fund's policy of
investing primarily in bonds rated within the four highest long-term or
two highest short-term rating categories or comparable quality unrated
securities and through adequate diversification among issuers and
industries.
- 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.
19
<PAGE> 20
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
OTHER CONSIDERATIONS
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 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: While the Funds do not engage in short-term trading, in
some cases in response to market conditions, a Fund's portfolio turnover 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.
YEAR 2000
Like other funds and business organizations around the world, the Funds could
be adversely affected if the computer systems used by the Adviser and other
service providers do not properly process and calculate date-related
information for the year 2000 and beyond.
The Funds have been assured that the Adviser and other service providers
(i.e., Administrator, Transfer Agent, Fund Accounting Agent, Custodian and
Distributor) have developed and are implementing clearly defined and
documented plans intended to minimize risks to services critical to the
Funds' operations associated with Year 2000 issues. Internal efforts include
a commitment to dedicate adequate staff and funding to identify and remedy
Year 2000 issues, and specific actions such as inventorying software systems,
determining inventory items that may not function properly after December 31,
1999, reprogramming or replacing such systems, and retesting for Year 2000
readiness. The Funds' Adviser and service providers are likewise seeking
assurances from their respective vendors and suppliers that such entities are
addressing any Year 2000 issues, and each provider intends to engage, where
appropriate, in private and industry or "streetwide" interface testing of
systems for Year 2000 readiness.
20
<PAGE> 21
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
YEAR 2000
CONTINUED
In the event that any systems upon which the Funds are dependent are not Year
2000 compliant by December 31, 1999, administrative errors and account
maintenance failures would likely occur. While the ultimate costs or
consequences of incomplete or untimely resolution of Year 2000 issues by the
Adviser or the Funds' service providers cannot be accurately assessed at this
time, the Funds currently have no reason to believe that the Year 2000 plans
of the Adviser and other service providers will not be completed by December
31, 1999, or that the anticipated costs associated with full implementation
of their plans will have a material adverse impact on either their business
operations or financial condition or those of the Funds. The Funds and the
Adviser will continue to closely monitor developments relating to this issue,
including development by the Adviser and other service providers of
contingency plans for providing back-up computer services in the event of a
systems failure or the inability of any provider to achieve Year 2000
readiness. Separately, the Adviser will monitor potential investment risk
related to Year 2000 issues.
In addition, Year 2000 issues may adversely affect companies in which the
Funds invest where, for example, such companies incur substantial costs to
address Year 2000 issues or suffer losses caused by the failure to adequately
or timely do so. The risk may be greater for those Funds which invest in the
securities of foreign issuers.
21
<PAGE> 22
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, 1998 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 is also 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.
22
<PAGE> 23
FUND MANAGEMENT
PORTFOLIO MANAGERS
CONTINUED
Equity Investments: Ronald M. Clark, Senior Managing Director, is responsible
for the day-to-day management of the Growth Fund and the Global Opportunities
Fund and is also responsible 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 that will be 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 is newly
organized and has no performance record of its own, 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.
MASTER TRUST PORTFOLIO ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
MASTER TRUST PORTFOLIO 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <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%
----------------------------------------------------------------------
FIXED INCOME N/A N/A N/A N/A -3.16% 20.47% 3.45% 10.48% 9.84%
----------------------------------------------------------------------
MONEY MARKET N/A N/A 4.26% 3.54% 3.98% 6.10% 5.50% 5.67% 5.49%
----------------------------------------------------------------------
DIVERSIFIED ASSETS N/A N/A 4.19% 5.49% -1.65% 20.66% 10.36% 15.91% 13.82%
-----------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 24
FUND MANAGEMENT
ADVISER'S PRIOR PERFORMANCE
CONTINUED
MASTER TRUST PORTFOLIO
AVERAGE ANNUAL RATES OF RETURN FOR PERIODS ENDING
DECEMBER 31, 1998
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 INCEPTION DATE
<S> <C> <C> <C> <C>
-------------------------------------------
EQUITY MASTER TRUST PORTFOLIO 27.55% 22.37% 18.23% 6/1/89*
-------------------------------------------
S&P 500(R) INDEX 28.75% 24.07% 18.22%
-----------------------------------------------------------------------------------------
FIXED INCOME MASTER TRUST PORTFOLIO 9.84% 7.93% 7.94% 4/1/93*
-------------------------------------------
LEHMAN GOVERNMENT/CORPORATE BOND INDEX 9.47% 7.30% 7.42%
-----------------------------------------------------------------------------------------
MONEY MARKET MASTER TRUST PORTFOLIO 5.49% 5.35% 4.49% 1/1/92*
-------------------------------------------
3 MONTH TREASURY BILL 5.06% 5.11% 4.61%
-----------------------------------------------------------------------------------------
DIVERSIFIED ASSETS MASTER TRUST PORTFOLIO 13.82% 11.56% 9.59% 1/1/92*
-------------------------------------------
LEHMAN INTERMEDIATE GOVERNMENT/ CORPORATE
BOND INDEX 8.42% 6.59% 6.99%
-------------------------------------------
DIVERSIFIED ASSETS INDEX** 13.36% 10.78% 9.91%
-----------------------------------------------------------------------------------------
* Commencement of Operations
** An index created by the Adviser consisting of several securities market indices
including 65% of the Lehman Intermediate Government/Corporate Bond Index, 25% of the
S&P 500H Index and 10% of the 90-day Treasury Bill.
</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.
24
<PAGE> 25
SHAREHOLDER INFORMATION
---------------------------
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
---------------------------
PRICING OF FUND SHARES
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.
25
<PAGE> 26
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.
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 .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.
26
<PAGE> 27
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 28
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. As of the date of
this Prospectus, the Funds have not yet issued any Reports.
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]
You can review the Funds' Reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission in Washington, D.C. Call 1-800-SEC-0330
for information on the operation of the Public Reference Room. This information
is also available on the SEC's internet site at http://www.sec.gov.
Investment Company Act file no. 811-9491.
