[Federal Register Volume 67, Number 167 (Wednesday, August 28, 2002)]
[Notices]
[Pages 55286-55288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21954]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25716; 812-12514]


USAllianz Variable Insurance Products Trust and USAllianz 
Advisers, LLC; Notice of Application

August 22, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 15(a) of the Act and rule 18f-2 under the Act.

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Summary of the Application: USAllianz Variable Insurance Products Trust 
(the ``Fund'') and USAllianz Advisers, LLC (the ``Manager'') (together, 
``Applicants'') request an order that would permit them to enter into 
and materially amend subadvisory agreements without shareholder 
approval.

Filing Dates: The application was filed on May 2, 2001, and amended on 
August 19, 2002. Applicants have agreed to file an amendment during the 
notice period, the substance of which is reflected in this notice.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
Applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on September 16, 
2002, and should be accompanied by proof of service on Applicants, in 
the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street, NW., Washington, DC 20549-
0609. Applicants: the Fund, c/o BISYS Fund Services, 3435 Stelzer Road, 
Columbus, OH 43219; the Manager, 5701 Golden Hills Drive, Minneapolis, 
MN 55416.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 942-0581, or Mary Kay Frech, Branch Chief, at (202) 
942-0564 (Division of Investment Management, Office of Investment 
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 5th Street, NW., Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Fund, a Delaware business trust, is registered under the Act 
as an open-end management investment company. The Fund currently is 
comprised of multiple series (each a ``Portfolio,'' and collectively, 
the ``Portfolios''), each with its own investment objectives and 
policies.\1\ The Portfolios currently serve as the investment medium 
for variable life insurance policies and variable annuity contracts 
issued by Allianz Life Insurance Company of North America or its 
insurance company affiliate, Preferred Life Insurance Company of New 
York.
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    \1\ Applicants also request relief with respect to future series 
of the Fund and any other registered open-end management investment 
companies and their series that: (a) Are advised by the Manager or 
any entity controlling, controlled by, or under common control with 
the Manager; (b) use the manager of managers structure described in 
the application; and (c) comply with the terms and conditions in the 
application (``Future Portfolios,'' included in the term 
``Portfolios''). The Fund is the only existing registered open-end 
management investment company that currently intends to rely on the 
requested order. If the name of any Portfolio contains the name of a 
Portfolio Manager (as defined below), it will be preceded by the 
name of the Manager or the name ``USAZ,'' which is an abbreviation 
of the name ``USAllianz Advisers, LLC.''
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    2. The Manager, registered under the Investment Advisers Act of 
1940 (the ``Advisers Act''), serves as the investment adviser to the 
Portfolios pursuant to an investment advisory agreement with the Fund 
(``Management Agreement'') that was approved by the board of trustees 
of the Fund (the ``Board''), including a majority of the trustees who 
are not ``interested persons,'' as defined in section 2(a)(19) of the 
Act (``Independent Trustees''), and by each Portfolio's initial 
shareholder.\2\ Under the terms of the Management Agreement, the 
Manager

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provides investment management services for each Portfolio and may hire 
one or more subadvisers (``Portfolio Managers'') to exercise day-to-day 
investment discretion over the assets of the Portfolio pursuant to 
separate investment sub-advisory agreements (``Portfolio Management 
Agreements''). All current and future Portfolio Managers will be 
registered under the Advisers Act. Portfolio Managers are recommended 
to the Board by the Manager and selected and approved by the Board, 
including a majority of the Independent Trustees. The Manager 
compensates each Portfolio Manager out of the fees paid to the Manager 
by the applicable Portfolio.
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    \2\ One of the Portfolios, the USAZ Money Market Fund, was 
recently restructured. The former investment adviser of the USAZ 
Money Market Fund, Allianz of America, Inc., an affiliate of the 
Manager, currently serves as its Portfolio Manager (as defined 
below) and the Manager serves as its investment adviser. The 
restructuring to permit the USAZ Money Market Fund to operate under 
the manager of managers structure will require the approval of its 
shareholders. A shareholder meeting of the USAZ Money Market Fund is 
scheduled to take place on August 30, 2002, for that purpose, as 
well as the ratification of its Management Agreement with the 
Manager and its Portfolio Management Agreement (as defined below) 
with the Portfolio Manager.
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    3. Subject to Board review, the Manager selects Portfolio Managers 
for the Portfolios, monitors and evaluates Portfolio Manager 
performance, and oversees Portfolio Manager compliance with the 
Portfolios' investment objectives, policies, and restrictions. The 
Manager recommends Portfolio Managers based upon a number of factors 
used to evaluate their skills in managing assets pursuant to particular 
investment objectives. The Manager also recommends to the Board whether 
a Portfolio Management Agreement should be renewed, modified or 
terminated.
    4. Applicants request relief to permit the Manager, subject to 
Board approval, to enter into and materially amend Portfolio Management 
Agreements without shareholder approval.\3\ The requested relief will 
not extend to a Portfolio Manager that is an affiliated person, as 
defined in section 2(a)(3) of the Act, of the Fund or the Manager, 
other than by reason of serving as a Portfolio Manager to one or more 
of the Portfolios (an ``Affiliated Portfolio Manager'').
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    \3\ The term ``shareholders'' includes variable contract owners, 
as applicable. The Fund's prospectus has disclosed with respect to 
each Portfolio, except in the case of the USAZ Money Market Fund, 
since the effective date of its registration statement, that the 
Fund would seek an exemptive order from the Commission permitting 
changes in Portfolio Managers without submitting the Portfolio 
Management Agreements to a vote of the applicable Portfolio's 
shareholders.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve the 
matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants believe that the requested relief meets this standard 
for the reasons discussed below.
    3. The investment structure of the Portfolios is different from 
that of traditional investment companies. Applicants assert that 
investors are relying on the Manager's experience to select one or more 
Portfolio Managers best suited to achieve a Portfolio's desired 
investment objectives. Applicants assert that, from the perspective of 
the investor, the role of the Portfolio Managers is comparable to that 
of individual portfolio managers employed by other investment advisory 
firms. Applicants contend that requiring shareholder approval of the 
Portfolio Management Agreements would impose unnecessary costs and 
delays on the Portfolios, and may preclude the Manager from acting 
promptly in a manner considered advisable by the Board. Applicants note 
that the Management Agreement will remain subject to the shareholder 
approval requirements of section 15(a) of the Act and rule 18f-2 under 
the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Future Portfolio, that does not currently have an 
effective registration statement and whose public shareholders will 
purchase shares on the basis of a prospectus containing the disclosures 
contemplated by condition number 2 below, may rely on the order 
requested herein, the operation of the Future Portfolio in the manner 
described in the application will be approved by its initial 
shareholder(s) before shares of such Future Portfolio are offered to 
the public.
    2. The prospectus of each Portfolio relying on the requested relief 
will disclose the existence, substance and effect of any order granted 
pursuant to the application. In addition, each Portfolio relying on the 
requested relief will hold itself out to the public as employing the 
manager of managers structure described in the application. A 
Portfolio's prospectus will prominently disclose that the Manager has 
ultimate responsibility to oversee the Portfolio Managers and recommend 
their hiring, termination and replacement.
    3. The Manager will provide general management services to each of 
the Portfolios, including overall supervisory responsibility for the 
general management and investment of each Portfolio's assets, and, 
subject to the review and approval by the Board will: (i) Set each 
Portfolio's overall investment strategies; (ii) evaluate, select, and 
recommend Portfolio Managers to manage all or part of a Portfolio's 
assets; (iii) when appropriate, allocate and reallocate a Portfolio's 
assets among multiple Portfolio Managers; (iv) monitor and evaluate the 
investment performance of Portfolio Managers; and (v) implement 
procedures reasonably designed to ensure that the Portfolio Managers 
comply with the relevant Portfolio's investment objectives, policies, 
and restrictions.
    4. At all times, a majority of the Board will be persons who are 
Independent Trustees, and the nomination of new or additional 
Independent Trustees will be placed within the discretion of the then-
existing Independent Trustees.
    5. The Manager will not enter into a Portfolio Management Agreement 
on behalf of a Portfolio with any Affiliated Portfolio Manager, unless 
such agreement, including the compensation to be paid thereunder, has 
been approved by the shareholders of the applicable Portfolio.
    6. When a Portfolio Manager change is proposed for a Portfolio with 
an Affiliated Portfolio Manager, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
minutes of the meeting of the Board, that such change is in the best 
interests of the applicable Portfolio and its shareholders and does not 
involve a conflict of interest from which the Manager or the Affiliated 
Portfolio Manager derives an inappropriate advantage.
    7. No trustee or officer of the Fund or director or officer of the 
Manager will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by that director, trustee, or 
officer) any interest in a Portfolio Manager except for: (i) ownership 
of interests in the Manager or any entity that controls, is controlled 
by, or is under common control with the Manager; or (ii) ownership of 
less than 1% of the outstanding securities of any class of equity or 
debt of a publicly-traded company that is either a Portfolio Manager or 
an entity that controls, is

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controlled by, or is under common control with a Portfolio Manager.
    8. Within 90 days of the hiring of any new Portfolio Manager, the 
Manager will furnish the shareholders of the applicable Portfolio all 
the information about the new Portfolio Manager that would be included 
in a proxy statement. This information will include any changes in such 
disclosure caused by the addition of a new Portfolio Manager. To meet 
this obligation, the Manager will provide the shareholders of the 
applicable Portfolio with an information statement meeting the 
requirements of Regulation 14C and Schedule 14C under the Securities 
Exchange Act of 1934 (``the 1934 Act''), as well as the requirements of 
Item 22 of Schedule 14A under the 1934 Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-21954 Filed 8-27-02; 8:45 am]
BILLING CODE 8010-01-P