Allianz Life Insurance Company of North America, et al; Notice of Application, 65892-65900 [E8-26390]
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65892
Federal Register / Vol. 73, No. 215 / Wednesday, November 5, 2008 / Notices
Rule 15c2–7 notices. However, because
such notices could be made, the
Commission estimates that one filing is
made annually pursuant to Rule 15c2–
7.
Based on prior industry reports, the
Commission estimates that the average
time required to enter a disclosure
pursuant to the rule is .75 minutes, or
45 seconds. The Commission sees no
reason to change this estimate. We
estimate that impacted respondents
spend a total of .0125 hours per year to
comply with the requirements of Rule
15c2–7 (1 notice (×) 45 seconds/notice).
The Commission estimates that a typical
employee of a broker-dealer charged to
ensure compliance with Commission
regulations receives annual
compensation of $128,960. This
compensation is the equivalent of
$62.00 per hour ($128,960 divided by
2,080 payroll hours per year). Thus, the
Commission estimates that the annual
cost burden for compliance with Rule
15c2–7 is $0.78 ($62.00/hour multiplied
by 0.0125 hours).
An agency may not conduct or
sponsor, and a person is not required to
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whether the information will have
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Please direct your comments to Lewis
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Exchange Commission, c/o Shirley
Martinson, 6432 General Green Way,
Alexandria, VA 22312 or send an e-mail
to: PRA_Mailbox@sec.gov.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–26389 Filed 11–4–08; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–28480; File No. 812–13474]
Allianz Life Insurance Company of
North America, et al; Notice of
Application
October 30, 2008.
Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’).
ACTION: Notice of application for an
order of approval pursuant to section
26(c) of the Investment Company Act of
1940, as amended (the ‘‘1940 Act’’ or
‘‘Act’’) and an order of exemption
pursuant to section 17(b) of the Act from
Section 17(a) of the Act.
AGENCY:
Allianz Life Insurance
Company of North America (‘‘Allianz
Life’’) and Allianz Life Insurance
Company of New York (‘‘Allianz NY’’)
(together the ‘‘Insurance Company
Applicants’’), their respective separate
accounts Allianz Life Variable Account
A (‘‘Allianz Account A’’), Allianz Life
Variable Account B (‘‘Allianz Account
B’’), and Allianz Life of NY Variable
Account C (‘‘Allianz Account C’’)
(collectively with the Insurance
Company Applicants, the
‘‘Applicants’’), and Allianz Variable
Insurance Products Trust (the ‘‘VIP
Trust’’ and collectively with the
Applicants, the ‘‘Section 17
Applicants’’).
SUMMARY OF APPLICATION: The
Applicants seek an order pursuant to
section 26(c) of the 1940 Act, approving
the substitution of certain securities (the
‘‘Substitution’’) issued by the Franklin
Templeton Variable Insurance Products
Trust (‘‘FTVIPT’’) and held by Allianz
Account A, Allianz Account B, or
Allianz Account C (collectively, the
‘‘Separate Accounts’’) to support certain
variable annuity contracts and variable
life insurance contracts (the
‘‘Contracts’’) issued by Allianz Life and
Allianz NY. The section 17 Applicants
seek an order pursuant to section 17(b)
of the 1940 Act exempting them to the
extent necessary to permit them to
engage in certain in-kind transactions in
connection with the Substitution.
FILING DATE: The application was filed
on January 11, 2008 and amended on
October 30, 2008.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
APPLICANTS:
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issued unless the Commission orders a
hearing. Interested persons may request
a hearing by writing to the Secretary of
the Commission and serving Applicants
with a copy of the request, personally or
by mail. Hearing requests should be
received by the Commission by 5:30
p.m. on November 24, 2008, 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 requester’s interest, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Secretary of the
Commission.
Secretary, SEC, 100 F Street,
NE., Washington, DC 20549–1090.
Applicants, Allianz Life Insurance
Company of North America, 5701
Golden Hills Dr., Minneapolis, MN
55416–1297.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Sally Samuel, Senior Counsel, or Joyce
M. Pickholz, Branch Chief, Office of
Insurance Products, Division of
Investment Management, at (202) 551–
6795.
The
following is a summary of the
application. The complete application
may be obtained for a fee from the SEC’s
Public Reference Branch, 100 F Street,
NE., Washington, DC 20549 (tel. (202)
551–8090).
SUPPLEMENTARY INFORMATION:
Applicants’ and VIP Trust’s
Representations
1. The Applicants propose to
substitute certain classes of shares of the
AZL Schroder Emerging Markets Equity
Fund (the ‘‘New Fund’’) for the
corresponding class of shares of the
Templeton Developing Markets
Securities Fund (the ‘‘Replaced Fund’’)
currently held by the Separate
Accounts. The following table shows
the share classes of the New Fund and
the Replaced Fund (each, a ‘‘Fund’’ and
collectively, the ‘‘Funds’’) involved in
the Substitution:
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Federal Register / Vol. 73, No. 215 / Wednesday, November 5, 2008 / Notices
New fund (adviser/subadviser)
Share classes
AZL Schroder Emerging Markets Equity Fund
(Allianz Investment Management LLC/
Schroder Investment Management North
America Inc.) **.
Class 1
Class 2.*
Replaced fund (adviser)
Share classes
Templeton Developing Markets Securities
Fund (Templeton Asset Management Ltd.).
Class 1.
Class 2.*
* A distribution fee is assessed against assets attributable to this class of shares at the annual rate of 0.25% of the average daily net assets attributable to the class.
** Prior to December 10, 2007, the AZL Schroder Emerging Markets Equity Fund was subadvised by OppenheimerFunds, Inc. and was known
as the AZL Oppenheimer Developing Markets Fund. Effective December 10, 2007, pursuant to an exemptive order issued to the VIP Trust on
September 17, 2002, the VIP Trust replaced OppenheimerFunds, Inc. with Schroder Investment Management North America Inc. as subadviser
to the Fund.
2. The New Fund is a series of the VIP
Trust, a Delaware statutory trust. The
VIP Trust is registered as an open-end
management investment company
under the 1940 Act (File No. 811–9491)
and its shares are registered as securities
under the Securities Act of 1933, as
amended (the ‘‘1933 Act’’) (File No.
333–83423).
3. Shares of the VIP Trust are sold to
separate accounts of Allianz Life and
Allianz NY for the purpose of funding
variable annuity contracts and variable
life insurance policies. The New Fund,
as well as all other funds offered by the
VIP Trust, is managed by Allianz
Investment Management LLC (‘‘AZIM’’),
a wholly owned subsidiary of Allianz
Life that was formerly known as Allianz
Life Advisers, LLC.
4. The following table shows the
inception date and net assets at
December 31, 2007 for each class of
shares of the New Fund:
New fund
Inception date
AZL Schroder Emerging Markets Equity Fund
Class 1 ....................................................................................................................................................
Class 2 ....................................................................................................................................................
5. Class 1 and Class 2 shares are
substantially identical, except that Class
1 shares are not assessed a 12b–1 fee
while Class 2 shares are assessed a 12b–
1 fee at an annual rate of 0.25% of
average daily net assets attributable to
Class 2 shares, which is the maximum
12b–1 fee permitted under the New
Fund’s Distribution Plan. Class 1 shares
are currently available to owners of
certain Contracts that are no longer
offered for sale. Class 2 shares are
currently available to owners of certain
Contracts that are currently offered for
sale. Both Class 1 and Class 2 shares are
included in the proposed Substitution.
6. Prior to December 10, 2007, the
New Fund was subadvised by
OppenheimerFunds, Inc. and was
known as the AZL Oppenheimer
Developing Markets Fund. Effective
December 10, 2007, the VIP Trust
replaced OppenheimerFunds, Inc. with
Schroder Investment Management North
America Inc. (‘‘SIMNA’’) as the
subadviser to the New Fund.
5/6/07
5/1/06
Inception date
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Templeton Developing Markets Securities Fund
Class 1 ....................................................................................................................................................
Class 2 ....................................................................................................................................................
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sale. Both Class 1 and Class 2 shares are
included in the proposed Substitution.
10. Pursuant to a ‘‘manager of
managers’’ exemptive order issued by
the Commission pursuant to section 6(c)
of the 1940 Act providing an exemption
from section 15(a) of the 1940 Act and
Rule 18f–2 under the 1940 Act (Order
No. 25734, dated September 17, 2002),
AZIM selects and manages subadvisers
for the various series of the VIP Trust,
subject to the oversight of the Board of
Trustees of the VIP Trust, without
obtaining shareholder approval (the
‘‘Manager of Managers Order’’). The
relief granted in the Manager of
PO 00000
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$359,359.
$249.2 million.
7. The Replaced Fund is a series of
FTVIPT. Shares of FTVIPT are
registered as securities under the 1933
Act (File No. 033–23493). The Replaced
Fund is managed by Templeton Asset
Management Ltd., which is not an
affiliate of the Insurance Company
Applicants.
8. The following table shows the
inception date and net assets at
December 31, 2007, for each class of
shares of the Replaced Fund:
Replaced fund
9. Class 1 and Class 2 shares of the
Replaced Fund are currently available
under certain Contracts issued by the
Insurance Company Applicants. Class 1
and Class 2 shares are substantially
identical, except that Class 1 shares are
not assessed a 12b–1 fee while Class 2
shares are assessed a 12b–1 fee at an
annual rate of 0.25% of average daily
net assets attributable to Class 2 shares.
Class 1 shares are currently available to
owners of certain Contracts that are no
longer offered for sale. Class 2 shares are
currently available to owners of certain
Contracts that are currently offered for
Net assets at
December 31, 2007
1/1/97
5/1/97
Net assets at
December 31, 2007
$753.8 million.
$1.1 billion.
Managers Order extends to the New
Fund. The New Fund is offered to
contract owners via a prospectus
containing disclosure (1) describing the
existence, substance, and effect of the
Manager of Managers Order; (2) holding
the New Fund out to the public as
employing the management structure
described in the application for the
Manager of Managers Order; and (3)
explaining that AZIM has the ultimate
responsibility (subject to oversight by
the Board of Trustees of the VIP Trust)
to oversee the subadvisers and
recommend their hiring, termination,
and replacement. The New Fund’s
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Federal Register / Vol. 73, No. 215 / Wednesday, November 5, 2008 / Notices
prospectus will be provided to each
affected contract owner prior to the
Substitution.
11. Subaccounts investing in Class 1
shares of the Replaced Fund and Class
1 shares of the New Fund are currently
available only to owners of certain
Contracts that are no longer offered for
sale by the Insurance Company
Applicants. Pursuant to the proposed
Substitution, the Insurance Company
Applicants will replace Class 1 shares of
the Replaced Fund held in its
subaccounts on the date of the
Substitution with Class 1 shares of the
New Fund.
12. Subaccounts investing in Class 2
shares of the Replaced Fund and Class
2 shares of the New Fund are currently
available to owners of certain Contracts
currently offered for sale by the
Insurance Company Applicants.
Pursuant to the proposed Substitution,
the Insurance Company Applicants will
replace Class 2 shares of the Replaced
Fund held in its subaccounts on the
date of the Substitution with Class 2
shares of the New Fund.
13. It is currently anticipated that the
Substitution will occur as soon as
practicable following receipt of the
Order of the Commission requested
herein (the ‘‘Substitution Date’’). After
the Substitution Date, subaccounts
investing in the Replaced Fund will no
longer be available under the Contracts
to any contract owner.
14. Allianz Life is a stock life
insurance company organized under the
laws of the state of Minnesota in 1896.
Allianz NY is a stock life insurance
company organized under the laws of
the state of New York on September 21,
1982. Allianz Life and Allianz NY are
subsidiaries of Allianz SE, a ‘‘Societas
Europaea’’ or European stock
corporation headquartered in Munich,
Germany.
Separate account
15. Allianz Life is the depositor and
sponsor of Allianz Account A and
Allianz Account B, and Allianz NY is
the depositor and sponsor of Allianz
Account C. Each of the Separate
Account Applicants meets the
definition of a ‘‘separate account’’ in
Rule 0–1(e) under the 1940 Act.
16. Allianz Account A is a segregated
asset account of Allianz Life. Allianz
Account A was established by Allianz
Life on May 31, 1985, under Minnesota
insurance laws. Allianz Account A is
used to fund certain variable life
insurance policies issued by Allianz
Life. Allianz Account A is currently
divided into a number of subaccounts,
each of which invests in a specific
underlying registered investment
company or portfolio thereof (each an
‘‘Investment Option’’). Allianz Account
A is registered as a unit investment trust
under the 1940 Act (File No. 811–
04965). Allianz Life does not currently
issue any new Contracts that allow
contract owners to invest in any of the
subaccounts of Allianz Account A.
17. Allianz Account B is a segregated
asset account of Allianz Life. Allianz
Account B was established by Allianz
Life on May 31, 1985, under Minnesota
insurance laws. Allianz Account B is
used to fund certain variable annuity
contracts issued by Allianz Life. Allianz
Account B is divided into a number of
subaccounts, each of which invests in a
specific Investment Option. Allianz
Account B is registered as a unit
investment trust under the 1940 Act
(File No. 811–05618).
18. Allianz Account C is a segregated
asset account of Allianz NY. Allianz
Account C was established by Allianz
NY on February 26, 1988, under New
York insurance laws. Allianz Account C
is used to fund certain variable annuity
contracts issued by Allianz NY. Allianz
Registration No.
333–82329
333–90260
333–111049
Allianz
Allianz
Allianz
Allianz
Allianz
hsrobinson on PROD1PC76 with NOTICES
Allianz Account B ..................................
Allianz Account B ..................................
Allianz Account B ..................................
333–120181
333–95729
33–23035
33–72046
333–06709
Account
Account
Account
Account
Account
B
B
B
B
B
..................................
..................................
..................................
..................................
..................................
22. In addition, Allianz Life has the
following registration statements that
are effective, but no longer updated, for
Separate account
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Contract name
Contracts sponsored by Allianz Account
A and Allianz Account B that are no
longer offered for sale (the ‘‘A and B
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33–11158
PO 00000
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Type of contract
Allianz Alterity (Class 2 shares) ...........
Allianz High Five (Class 2 shares) .......
Allianz High Five Bonus (Class 2
shares).
Allianz High Five L (Class 2 shares) ....
Allianz Rewards (Class 2 shares) ........
Valuemark II (Class 1 shares) ..............
Valuemark III (Class 1 shares) .............
Valuemark IV (Class 1 shares) ............
Registration No.
Allianz Account A ..................................
Account C is divided into a number of
subaccounts, each of which invests in a
specific Investment Option. Allianz
Account C is registered as a unit
investment trust under the 1940 Act
(File No. 811–05716).
19. The Contracts are variable annuity
contracts and variable life insurance
policies. Allianz Life currently issues
individual deferred variable annuity
contracts and has previously issued
immediate variable annuity contracts
and variable life insurance policies.
Allianz NY issues individual deferred
variable annuity contracts offered for
sale in New York.
20. Allianz Life Financial Services,
LLC (‘‘Allianz Life Financial’’), a
Minnesota limited liability company
and a wholly owned subsidiary of
Allianz Life, serves as the principal
underwriter of the Contracts. Allianz
Life Financial is registered as a broker
dealer with the Commission under the
Securities Exchange Act of 1934 (the
‘‘1934 Act’’) as well as with the
securities commissions in the states in
which it operates. Allianz Life Financial
does not itself sell the Contracts on a
retail basis. Rather, Allianz Life
Financial enters into selling agreements
with other broker-dealers registered
under the 1934 Act for the sale of the
Contracts. These selling firms include
third party broker/dealers and Questar
Capital Corporation, an affiliated
broker/dealer.
21. Currently, Allianz Life has no
effective registration statements for
Contracts sponsored by Allianz Account
A. The table below shows effective
registration statements with the
Commission for Contracts sponsored by
Allianz Account B that offer the
Replaced Fund as an Investment
Option:
Variable Deferred Annuity.
Variable Deferred Annuity.
Variable Deferred Annuity.
Variable
Variable
Variable
Variable
Variable
Deferred
Deferred
Deferred
Deferred
Deferred
Annuity.
Annuity.
Annuity.
Annuity.
Annuity.
Great Wested Contracts’’) but which
offer the Replaced Fund as an
Investment Option:
Contract Name
Type of contract
Allianz ValueLife (Class 1 shares) .......
Flexible Premium Variable Universal
Life.
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Separate account
Allianz
Allianz
Allianz
Allianz
Account
Account
Account
Account
B
B
B
A
Registration No.
..................................
..................................
..................................
..................................
333–63719
333–101812
333–47886
333–60206
Allianz Account B ..................................
33–76190
Allianz Account A ..................................
33–15464
23. Currently Allianz NY has the
following effective registration
Separate account
Contract Name
USAllianz
USAllianz
USAllianz
USAllianz
Valuemark Income Plus (Class 1
shares).
Valuemark Life (Class 1 shares) ..........
Registration No.
333–19699
333–105274
333–75718
24. In addition, Allianz NY has the
following registration statements that
are effective, but no longer updated, for
Contracts sponsored by Allianz Account
C (the ‘‘C Great Wested Contracts’’) that
are no longer offered for sale but which
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33–26646
333–19699
25. The Contracts allow contract
owners to allocate premium and
contract value among the subaccounts
investing in a large number of
Investment Options in a wide variety of
asset categories that are managed by a
large number of asset managers. The
exact number of Investment Options
available varies somewhat from Contract
to Contract, depending on when the
Contracts were first offered, whether the
Contracts are currently offered for sale,
which separate account issued the
Contract, product design, and other
similar factors. All of the Contracts that
are currently offered for sale offer 75
Investment Options. Both the A and B
Great Wested Contracts and the C Great
Wested Contracts offer a minimum of 34
Investment Options. The number of
Investment Options available in the
Contracts affected by the Substitution is
shown in the Application.
26. Under the Contracts, the Insurance
Company Applicants reserve the right,
subject to regulatory approval, to
substitute one of the Investment Options
with another Investment Option after
appropriate notice. Moreover, the
Contracts permit the Insurance
Company Applicants to limit allocation
of purchase payments to one or more
subaccounts that invest in an
Investment Option. The prospectuses or
statements of additional information for
the Contracts also contain appropriate
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Type of contract
Variable Deferred Annuity.
Variable Deferred Annuity.
Variable Deferred Annuity.
offer the Replaced Fund as an
Investment Option:
Type of contract
Valuemark II NY (Class 1 shares) ........
Valuemark IV NY (Class 1 shares) ......
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Immediate Annuity.
Single Premium Variable Life.
Contract name
disclosure of these rights. Thus, subject
to regulatory approval, the Contracts
permit the Insurance Company
Applicants to stop accepting purchase
payments into one or more Investment
Options and/or to substitute the shares
representing an Investment Option held
in a subaccount for the shares
representing another Investment Option.
27. The proposed Substitution is part
of an overall business plan of the
Insurance Company Applicants to make
their respective products more efficient
to monitor and administer and more
competitive (both in terms of new sales
and the retention of existing business).
The Insurance Company Applicants
believe that more concentrated and
streamlined operations for Investment
Options will result in increased
operational and administrative
efficiencies and economies of scale for
the Insurance Company Applicants. In
particular, the Insurance Company
Applicants feel that concentrating the
number of non-affiliated asset managers
that advise or subadvise the Investment
Options available through the Contracts
will simplify the administration of the
Contracts with regard to
communications with asset managers
and contract owners, and simplify the
preparation of various reports and
disclosure documents. Furthermore, the
Insurance Company Applicants feel that
by reducing the number of non-affiliated
Deferred Annuity.
Deferred Annuity.
Deferred Annuity.
Premium Variable Universal
C that offer the Replaced Fund as an
Investment Option:
Allianz Advantage NY (Class 2 shares)
Allianz Charter II NY (Class 2 shares)
Allianz Opportunity NY (Class 2
shares).
Registration No.
Allianz Account C ..................................
Allianz Account C ..................................
Variable
Variable
Variable
Flexible
Life.
Variable
Contract name
Allianz Account C ..................................
Allianz Account C ..................................
Allianz Account C ..................................
Separate account
Type of contract
Charter (Class 2 shares) .....
Charter II (Class 2 shares) ..
Dimensions (Class 2 shares)
LifeFund (Class 2 shares) ...
statements with the Commission for
Contracts sponsored by Allianz Account
65895
Variable Deferred Annuity.
Variable Deferred Annuity.
asset managers that manage Investment
Options underlying their Contracts and
increasing the Investment Options for
which AZIM serves as the investment
manager, they will increase their ability
to effectively manage the Investment
Options available to contract owners.
Because AZIM operates pursuant to the
Manager of Managers Order, the
replacement of portfolio managers or
subadvisers when appropriate could be
effected more efficiently and the need
for fund changes that may affect
contract owners may be reduced,
thereby facilitating appropriate longterm strategic planning for contract
owners.
28. For these reasons and the reasons
discussed below, the Applicants believe
that substituting the New Fund for the
Replaced Fund is appropriate and in the
best interests of the contract owners.
29. The Insurance Company
Applicants believe that the New Fund is
an appropriate replacement for the
Replaced Fund because its investment
objective and principal investment
policies are substantially similar to
those of the Replaced Fund. In addition,
the principal investment risks of the
Replaced Fund and the New Fund are
substantially similar. Comparisons of
the investment objectives, principal
investment policies and principal
investment risks of the Funds are set
forth in the Application.
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30. The following chart compares the
management fees and the total operating
expenses (before and after any waivers
and reimbursements) for the year ended
December 31, 2007, expressed as an
annual percentage of average daily net
assets, of the Replaced Fund and the
New Fund.
Templeton developing markets
securities fund
Class 1
(percent)
Management Fee .............................................................................................
Distribution (12b–1) Fees ................................................................................
Other Expenses ...............................................................................................
Acquired Fund Fees and Expenses ................................................................
Total Annual Fund Operating Expenses .........................................................
Fee Waiver ......................................................................................................
Net Annual Fund Operating Expenses ............................................................
Class 2
(percent)
1.23
0.00
0.25
0.00
1.48
0.00
1.48
AZL schroder emerging
markets equity fund
Class 1
(percent)
1.23
0.25
0.25
0.00
1.73
0.00
1.73
Class 2
(percent)
* 1.23
0.00
0.48
0.00
1.71
** 0.31
** 1.40
* 1.23
0.25
0.48
0.00
1.96
** 0.31
** 1.65
* AZIM and the Fund have entered into a written agreement whereby AZIM has voluntarily reduced the management fee to 0.95% through
April 30, 2009.
** AZIM and the AZL Schroder Emerging Markets Equity Fund have entered into a written contract limiting operating expenses to 1.40% and
1.65% for Class 1 and Class 2 shares, respectively through April 30, 2009. AZIM and the AZL Schroder Emerging Markets Equity Fund have
agreed to limit Fund operating expenses, net of acquired fund fees and expenses, to an amount not greater than 1.48% and 1.73% for Class 1
and Class 2 shares respectively for 24 months from the date of the Substitution.
31. The following table shows the
assets and performance of the Funds for
the years shown:
Net assets (M)
At December 31, 2007
Class 1
Templeton Developing Markets Securities Fund .............................................
AZL Schroder Emerging Markets Equity Fund * ..............................................
At December 31, 2006
Class 2
$753.8
(1) 0.4
Class 1
$1,090.6
249.2
Class 2
$749.1
(1) N/A
$857.5
(2) 93.7
Annual total returns
2007
Class 1
(percent)
Templeton Developing Markets Securities Fund .............................................
AZL Schroder Emerging Markets Equity Fund * ..............................................
2006
Class 2
(percent)
29.09
28.78
30.32
(1) (3) 19.23
Class 1
(percent)
Class 2
(percent)
28.43
28.09
(1) N/A
(2) (4) 8.65
hsrobinson on PROD1PC76 with NOTICES
* Prior to December 10, 2007, the AZL Schroder Emerging Markets Equity Fund was subadvised by OppenheimerFunds, Inc. and was known
as the AZL Oppenheimer Developing Markets Fund.
1 Class 1 shares of the AZL Schroder Emerging Markets Equity Fund commenced operations on May 6, 2007.
2 Class 2 shares of the AZL Schroder Emerging Markets Equity Fund commenced operations on May 1, 2006.
3 Annualized for the period from commencement of operations on May 6, 2007, through December 31, 2007.
4 Annualized for the period from commencement of operation on May 1, 2006, through December 31, 2006.
32. Applicants hereby request the
Commission’s approval to effect the
substitution of shares of the New Fund
for shares of the Replaced Fund as
follows:
• Class 1 shares of the AZL Schroder
Emerging Markets Equity Fund for Class
1 shares of the Templeton Developing
Markets Securities Fund; and
• Class 2 shares of the AZL Schroder
Emerging Markets Equity Fund for Class
2 shares of the Templeton Developing
Markets Securities Fund.
33. At the close of business on the
Substitution Date, Allianz Life and
Allianz NY will each redeem shares of
the Replaced Fund held by their
Separate Accounts in kind and apply
the proceeds of such redemptions to the
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17:24 Nov 04, 2008
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purchase of shares of the New Fund.
Thus, after the Substitution, each
subaccount of the Separate Accounts
previously holding shares of the
Replaced Fund will hold shares of the
New Fund.
34. Redemption requests and
purchase orders will be placed
simultaneously so that redemption of
Replaced Fund shares and purchase of
New Fund shares will both occur at the
price for such shares computed as of the
close of business on the Substitution
Date in a manner consistent with Rule
22c–1 under the 1940 Act. As a result,
the full net asset value of the Replaced
Fund shares held by the Separate
Account Applicants will be reflected in
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the contract owners’ contract values
following the Substitution, without
reduction for brokerage or other such
fees or charges. All expenses incurred in
connection with the Substitution,
including legal, accounting,
transactional, and other fees and
expenses, including brokerage
commissions, will be paid by Allianz
Life, Allianz NY, or the manager of the
New Fund. Accordingly, contract value
attributable to contract owners then
invested in the Replaced Fund will
remain fully invested at all times, and
the Substitution will take place at
relative net asset value with no change
in the amount of any contract owner’s
contract value, death benefit, or in the
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dollar value of his or her investment in
the applicable Separate Account.
35. Affected contract owners will not
incur any fees or charges in connection
with the Substitution so that the net
asset value of redeemed shares of the
Replaced Fund held by the Separate
Account Applicants will be reflected in
the contract owners’ contract values
following the Substitution. Moreover,
neither the obligations of the respective
Insurance Company Applicants under
the Contracts nor the rights of contract
owners will be altered in any way by the
Substitution. The Substitution will not
impose any tax liability or have any
adverse tax consequences on contract
owners. The Substitution will not cause
Contract fees and charges currently
being paid by existing owners of
Contracts to be greater after the
Substitution than they were before the
Substitution. For a period of at least 30
days following the Substitution, neither
Allianz Life nor Allianz NY will
exercise any right it may have under the
Contracts to impose restrictions on
transfers, except pursuant to any
Investment Option allocation
restrictions under the Contracts. One
exception to this would be restrictions
that Allianz Life or Allianz NY may
impose to deter or prevent ‘‘market
timing’’ activities by owners of
Contracts or their agents.
36. The Insurance Company
Applicants and VIP Trust represent that
AZIM and the VIP Trust have entered
into a written contract whereby during
the 24 months following the
Substitution Date, the annualized total
net operating expenses, net of any
acquired fund fees and expenses, of the
New Fund (taking into account
applicable fee waivers and expense
reimbursements) will not exceed the
total net operating expenses, net of any
acquired fund fees and expenses, of the
Replaced Fund for the fiscal year ended
December 31, 2007. In addition, for the
24 months following the Substitution
Date, the Insurance Company
Applicants will not increase asset-based
fees and charges for the Contracts
outstanding on the Substitution Date.
Thereafter, expenses for the New Fund
will vary from year to year and may
exceed those of the Replaced Fund.
37. The Insurance Company
Applicants mailed a Notice of
Substitution (the ‘‘Notice’’) to affected
contract owner stating that during the
period from the date of the Notice
through the date 30 days after the
Substitution (the ‘‘Free Transfer
Period’’), the respective Insurance
Company Applicants will allow the
affected contract owners to make one
transfer of contract value held in each
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subaccount investing in the Replaced
Fund (before the Substitution) or New
Fund (after the Substitution) to one or
more Investment Options available
pursuant to the Contracts without
charge and without assessing transfer
fees. Such a transfer also will not be
counted as a transfer request under any
contractual provisions of the Contracts
that limit the number of transfers that
may be made without charge.
38. Under the Manager of Managers
Order, subject to the approval of its
Board of Trustees, the VIP Trust may
retain one or more subadvisers for any
of its Funds without the approval of
shareholders of the Fund. However,
after the Substitution Date, Applicants
and VIP Trust represent that the VIP
Trust will not retain any new subadviser
for the New Fund, or otherwise rely on
the Manager of Managers Order in
connection with the New Fund, without
first obtaining shareholder approval of
either: (1) The new subadviser or (2) the
New Fund’s ability to rely on the
Manager of Managers Order.
39. The Notice was mailed to all
affected owners on August 11–12, 2008.
The Notice informed contract owners of
each of the Contracts that the
Applicants have filed the Application
seeking approval of the Substitution.
The Notice set forth the anticipated
Substitution Date and advised affected
contract owners that contract values
allocated to subaccounts investing in
shares of the Replaced Fund will be
transferred to subaccounts investing in
shares of the New Fund, without charge
(including sales charges or surrender
charges) and without counting toward
the number of transfers that may be
permitted without charge, on the
Substitution Date. The Notice also
stated that, during the Free Transfer
Period, affected contract owners may
make one transfer of contract value from
each subaccount investing in the
Replaced Fund (before the Substitution)
or the New Fund (after the Substitution)
to one or more other subaccount(s),
subject to any Investment Option
allocation restrictions under their
Contract, without charge and without
the transfer counting against any
limitations on transfers. Further, prior to
the Substitution, all affected contract
owners will receive a copy of the most
recent prospectus for the New Fund.
40. Within five days following the
Substitution, the Insurance Company
Applicants will send a written notice to
affected contract owners stating that the
Substitution was carried out and
reiterating the information set forth in
the Notice.
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65897
Applicants’ Legal Analysis
1. Section 26(c) of the 1940 Act
provides as follows: It shall be unlawful
for any depositor or trustee of a
registered unit investment trust holding
the security of a single issuer to
substitute another security for such
security unless the Commission shall
have approved such substitution. The
Commission shall issue an order
approving such substitution if the
evidence establishes that it is consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of this title.
2. The purposes, terms, and
conditions of the Substitution are
consistent with the principles and
purposes of section 26(c) and do not
entail any of the abuses that section
26(c) is designed to prevent. Contract
owners will not be assessed charges in
connection with the Substitution and
their annual fund net total operating
expenses are expected to remain the
same or decrease. In addition, to the
extent a contract owner does not wish
to participate in the Substitution, he or
she is free to make one transfer to any
other option available under the
relevant Contract at any time prior to
the date of the Substitution or during
the 30-day period following the date of
the Substitution without any transfer fee
and without that transfer counting as a
transfer request under any contractual
provisions of the Contracts that limit the
number of transfers that may be made
without charge. Moreover, the Contracts
have features that provide adequate
protection to contract owners. These
features include: (1) A significant
number of different Investment Options;
(2) Investment Options that are
reasonably diversified; (3) Investment
Options that are reasonably seasoned;
(4) reasonable transferability between
Investment Options; (5) investment
choices that include an option that is
intended to reduce or eliminate
fluctuation of principal; and (6)
reasonable liquidity in the form of free
partial withdrawal rights.
3. In addition, contract owners will be
substituted into the New Fund whose
investment objective, principal
investment policies, and risks will be
substantially similar to those of the
Replaced Fund, with net total operating
expenses that are anticipated to be equal
to or less than those of the Replaced
Fund after applicable fee waivers and
expense reimbursements. Like the Class
1 shares of the Replaced Fund which are
not assessed a 12b–1 fee, the
corresponding Class 1 shares of the New
Fund will not be assessed a 12b–1 fee.
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4. The following chart summarizes the
similarities and differences between the
Replaced Fund and the New Fund:
Templeton developing markets securities fund
Net Total Operating Expenses (12/31/2007) .....
AZL Schroder emerging markets equity fund
1.48% (Class 1) ................................................
1.73% (Class 2) ................................................
Long-term capital appreciation .........................
The Fund invests at least 80% of its net assets in emerging market investments.
Risks ..................................................................
Stock Risk; Value Style Investing; Foreign Securities; Smaller and Midsize Companies;
Country, Sector or Industry Focus; Liquidity.
Type of Advisory Services .................................
Managed by Templeton Asset Management
Ltd.
1.40% (Class 1).
1.65% (Class 2).
Capital Appreciation.
The Fund invests at least 80% of its net assets, plus any borrowings for investment
purposes, in equity securities of companies
the Fund’s subadviser believes to be
‘‘emerging market’’ issuers.
Market Risk; Selection Risk; Capitalization
Risk; Foreign Risk; Emerging Markets Risk;
Currency Risk; Market Risk; Derivatives
Risk; Convertible Securities Risk; Investments in Pooled Vehicles Risk; Liquidity
Risk; Initial Public Offerings Risk.
Subadvised by Schroder Investment Management North America Inc.
Total Annual Return for period ended December 31, 2007
Class 1 ........................................................
Class 2 ........................................................
Assets Under Management at Dec. 31, 2007
Class 1 ........................................................
Class 2 ........................................................
29.09% .............................................................
28.78% .............................................................
19.23% *.
30.32%.
$753.8 million ** ................................................
$1.1 billion ** .....................................................
$0.4 million ****.
$249.2 million.
Investment Objectives .......................................
Investment Policies (summary) .........................
hsrobinson on PROD1PC76 with NOTICES
* Annualized for the period from commencement of operations on May 1, 2007 through December 31, 2007.
** Assets held in the Separate Accounts on December 31, 2007, were $85.3 million for Class 1 shares and $268.3 million for Class 2 shares.
*** Class 1 shares of the AZL Schroder Emerging markets Equity Fund commenced operations on May 6, 2007.
5. For a period of 24 months from the
date of the Substitution, the New Fund
( AZL Schroder Emerging Markets
Equity Fund)) will be subject to an
expense cap limiting the net total
operating expenses for the New Fund to
a maximum of 1.48% for Class 1 shares
and 1.73% for Class 2 shares,
respectively. These expense caps are
equal to the net total operating expenses
for Class 1 and Class 2 shares of the
Replaced Fund (Templeton Developing
Markets Securities Fund) for the fiscal
year ended December 31, 2007. No 12b–
1 fees are assessed to Class 1 shares of
either the Replaced Fund or the New
Fund. Identical 12b–1 fees of 0.25% of
average daily net assets are assessed to
Class 2 shares of both the Replaced
Fund and the New Fund.
6. The investment objectives and
policies are substantially similar for
both Funds since both generally invest
in common stocks of companies in
emerging markets. The risks listed are
very similar for both Funds and are
consistent with the risks generally
applicable to investing in emerging
market equity funds.
7. In addition to substantially similar
investment objectives, principal
investment policies and risks, as well as
anticipated equal or lower net total
operating expenses, the advisory
services that are provided to the New
Fund by its subadviser are comparable
to the types of advisory services
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17:24 Nov 04, 2008
Jkt 217001
currently provided to the Replaced
Fund by its investment adviser.
Moreover, because the New Fund
operates pursuant to the Manager of
Managers Order, Applicants believe that
the proposed Substitution will provide
protection to contract owners by giving
AZIM the flexibility to change the
subadviser of the New Fund should
such a change become warranted or
advisable, provided that subsequent to
the Substitution, AZIM first obtains
shareholder approval of either: (1) The
new subadviser or (2) the New Fund’s
ability to rely on the Manager of
Managers Order.
Terms and Conditions of Section 26(c)
Relief
1. Applicants submit that the
Substitution does not present the type of
costly forced redemption or other harms
that section 26(c) was intended to guard
against and is consistent with the
protection of investors and the purposes
fairly intended by the 1940 Act. As
noted above, the Substitution is
consistent with contract owners’
objectives and risk expectations because
the investment objective, principal
investment policies and risks of the
New Fund are substantially similar to
those of the Replaced Fund. In addition,
the net total operating expenses of the
New Fund are anticipated to be equal to
or less than those of the Replaced Fund,
after applicable fee waivers and expense
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reimbursements that will be in place for
the New Fund for a period of 24 months
following the Substitution.
2. As noted above, the Contracts
contain features that provide adequate
protection to contract owners in the
event of a substitution. Moreover, the
Substitution will be subject to the
following terms and conditions: (1) A
contract owner may request that his or
her contract value be reallocated to
another Investment Option, subject to
any Investment Option allocation
restrictions under their Contract, at any
time during the Free Transfer Period
without charge. The Free Transfer
Period provides sufficient time for
contract owners to reconsider their
Investment Options; (2) the Substitution
will be at the net asset value of the
respective shares, without the
imposition of any transfer, brokerage or
similar charge; (3) neither the contract
owners, the Replaced Fund, nor the
New Fund will bear any costs of the
Substitution, and all legal, accounting,
and transactional costs and any
brokerage or other costs incurred in the
Substitution will be paid by the
Insurance Company Applicants or the
manager of the New Fund, and
accordingly, the Substitution will have
no impact on the contract owners’
contract values; (4) the Substitution will
in no way alter the contractual
obligations of the Insurance Company
Applicants or the rights and privileges
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hsrobinson on PROD1PC76 with NOTICES
of contract owners under the Contracts;
and (5) the Substitution will in no way
alter the tax benefits to contract owners.
3. The Applicants, on the basis of the
facts and circumstances described
herein, have determined that it is in the
best interests of contract owners to
substitute shares of the Replaced Fund
with shares of the New Fund.
4. Applicants request an Order of the
Commission pursuant to Section 26(c)
of the 1940 Act approving the
Substitution on the terms set forth in
this Application. Applicants believe, for
all of the reasons stated above, that the
Substitution is consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the 1940 Act.
Section 17(b) Relief
1. The section 17 Applicants also
request that the Commission issue an
order pursuant to section 17(b) of the
1940 Act exempting them from section
17(a) of the 1940 Act to the extent
necessary to permit them to carry out
the Substitution through in-kind
purchases and sales of the New Fund
shares.
2. Section 17(a)(1) of the 1940 Act
prohibits any affiliated person of a
registered investment company, or an
affiliated person of an affiliated person,
acting as principal, from selling any
security or other property to such
registered investment company. Section
17(a)(2) of the 1940 Act prohibits any of
the persons described above, acting as
principal, from purchasing any security
or other property from such registered
investment company.
3. The Section 17 Applicants may be
considered affiliates of the New Fund
based upon the definition of ‘‘affiliated
person’’ in section 2(a)(3) of the 1940
Act. Shares of the funds of the VIP Trust
are held solely by the Separate
Accounts. Because shares held by a
separate account of an insurance
company are legally owned by the
insurance company, Allianz Life and
Allianz NY and their affiliates
collectively own of record all of the
shares of the funds of the VIP Trust,
including the New Fund. Further,
AZIM, an affiliated person of the VIP
Trust by virtue of section 2(a)(3)(E) of
the 1940 Act, is a wholly owned
subsidiary of Allianz Life. For these
reasons, the VIP Trust and the New
Fund are arguably under the control of
Allianz Life and Allianz NY
notwithstanding the fact that contract
owners may be considered the
beneficial owners of those shares held
in the Separate Accounts. If the VIP
Trust and the New Fund are under the
control of Allianz Life and Allianz NY,
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17:24 Nov 04, 2008
Jkt 217001
then each of Allianz Life and Allianz
NY, or any person controlling Allianz
Life and Allianz NY, or any person
under common control with Allianz Life
and Allianz NY, is an affiliated person
of the VIP Trust and the New Fund.
Similarly, if the VIP Trust and the New
Fund are under the control of Allianz
Life and Allianz NY, then the VIP Trust
and the New Fund are affiliated persons
of Allianz Life and Allianz NY, and of
any persons that control Allianz Life
and Allianz NY or are under common
control with Allianz Life and Allianz
NY.
4. At the close of business on the
Substitution Date, the Insurance
Company Applicants will redeem shares
of the Replaced Fund either in-kind or
in cash and use the proceeds of such
redemptions to purchase shares of the
New Fund, with each subaccount of the
applicable Separate Account investing
the proceeds of its redemption from the
Replaced Fund in the New Fund. Thus,
the proposed transactions may involve a
transfer of portfolio securities by the
Replaced Fund to Allianz Life and
Allianz NY. Immediately thereafter,
Allianz Life and Allianz NY would
purchase shares of the New Fund with
the portfolio securities received from
the Replaced Fund. This aspect of the
Substitution may be deemed to involve
one or more sales by Allianz Life or
Allianz NY of securities or other
property to the New Fund, and could
therefore be viewed as being prohibited
by section 17(a). Accordingly, the
section 17 Applicants seek relief from
section 17(a) for the in-kind purchases
and sales of the New Fund shares. The
section 17 Applicants do not believe
that the redemption of shares of the
Replaced Fund in connection with the
Substitution would involve a
transaction with a registered investment
company of which it is an affiliated
person. The redemption of shares of the
Replaced Fund will be carried out in
accordance with the Signature Financial
Group no-action letter (publicly
available December 28, 1999).
5. Any in-kind redemptions and
purchases for purposes of the
Substitution will be effected in a
manner consistent with the investment
objectives and policies of the Replaced
Fund and the New Fund. Subject to the
oversight of AZIM, the subadviser of the
New Fund will review the securities
holdings of the Replaced Fund and
determine which of the Replaced Fund’s
portfolio holdings would be suitable
investments for the New Fund in the
overall context of the New Fund’s
investment objective and policies and
consistent with its management of the
New Fund, and will accept only those
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65899
securities as consideration for shares
that it would have acquired for each
such Fund in a cash transaction. The
section 17 Applicants represent that
these portfolio securities will be of the
type and quality that the New Fund
would have acquired with the proceeds
from share sales had the shares been
sold for cash.
6. The section 17 Applicants state that
any securities to be paid out as
redemption proceeds and subsequently
contributed to the New Fund to effect
the contemplated in-kind purchases of
shares will be valued based on the
procedures established by the board of
VIP Trust. The redeeming and
purchasing values will be the same.
Consistent with Rule 17a–7(d) under the
1940 Act, no brokerage commissions,
fees, or other remuneration will be paid
by the Replaced Fund or the New Fund
in connection with the in-kind
transactions. If AZIM declines to accept
particular portfolio securities of the
Replaced Fund for purchase in-kind of
shares of the New Fund, those positions
will be liquidated by the Replaced Fund
and shares of the New Fund will be
purchased with cash.
7. Section 17(b) of the 1940 Act
provides that the Commission may,
upon application, grant an order
exempting any transaction from the
prohibitions of section 17(a) if the
evidence establishes that: (1) The terms
of the proposed transaction, including
the consideration to be paid or received,
are reasonable and fair and do not
involve overreaching on the part of any
person concerned; (2) the proposed
transaction is consistent with the policy
of each registered investment company
concerned, as recited in its registration
statement and records found under the
1940 Act; and (3) the proposed
transaction is consistent with the
general purposes of the 1940 Act.
8. The section 17 Applicants submit
that the terms of the Substitution,
including the consideration to be paid
and received, are reasonable and fair
and do not involve overreaching on the
part of any person concerned
principally because the transactions will
conform with all but one of the
conditions enumerated in Rule 17a–7
under the 1940 Act. The use of in-kind
transactions will not cause contract
owner interests to be diluted. The
proposed transactions will take place at
relative net asset value in conformity
with the requirements of section 22(c) of
the 1940 Act and Rule 22c–1 thereunder
with no change in the amount of any
contract owner’s contract value or death
benefit or in the dollar value of his or
her investment in any of the Separate
Accounts. The proposed transaction
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cannot be effected at a price that is
disadvantageous to either the Replaced
Fund or the New Fund. Contract owners
will not suffer any adverse tax
consequences as a result of the
Substitution. Fees and charges under
the Contracts will not increase because
of the Substitution. Even though they
may not rely on Rule 17a–7 under the
1940 Act, the section 17 Applicants
submit that the Rule’s conditions
outline the type of safeguards that result
in transactions that are fair and
reasonable to registered investment
company participants and preclude
overreaching in connection with an
investment company by its affiliated
persons.
9. The board of the VIP Trust has
adopted procedures, as required by
paragraph (e)(1) of Rule 17a–7 under the
1940 Act, pursuant to which the New
Fund may purchase and sell securities
to and from its affiliates. The section 17
Applicants will carry out the proposed
in-kind purchases in conformity with all
of the conditions of Rule 17a–7 and the
New Fund’s procedures thereunder,
except that the consideration paid for
the securities being purchased or sold
may not be entirely cash. Nevertheless,
the circumstances surrounding the
proposed Substitution will be such as to
offer to the New Fund the same degree
of protection from overreaching that
Rule 17a–7 provides to the New Fund
generally in connection with its
purchase and sale of securities under
that Rule in the ordinary course of its
business. In particular, Allianz Life and
Allianz NY (or any of their affiliates)
cannot effect the proposed transactions
at a price that is disadvantageous to the
New Fund. Although the transactions
may not be entirely for cash, each will
be effected based upon (1) the
independent market price of the
portfolio securities valued as specified
in paragraph (b) of Rule 17a–7, and (2)
the net asset value per share of each
Fund involved valued in accordance
with the procedures disclosed in its
respective registration statement and as
required by Rule 22c–1 under the 1940
Act. No brokerage commission, fee, or
other remuneration will be paid to any
party in connection with the proposed
transactions. Further, the transactions
will be reviewed by the Chief
Compliance Officer of the VIP Trust on
behalf of the VIP Trust’s Board of
Trustees and will be reported to VIP
Trust’s Board of Trustees in the same
manner as any other Rule 17a–7
transaction involving the New Fund
would be reported.
10. The proposed transactions also are
reasonable and fair in that they will be
effected in a manner consistent with the
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17:24 Nov 04, 2008
Jkt 217001
public interest and the protection of
investors. Contract owners will be fully
informed of the terms of the
Substitution and they will be provided
a prospectus for the New Fund. In
addition, contract owners will have the
opportunity to make a free transfer from
the New Fund to any other available
Investment Option offered under their
Contract, subject to any Investment
Option allocation restrictions under
their Contract, during the Free Transfer
Period.
11. The section 17 Applicants also
submit that the Substitution is
consistent with the policies of the
Replaced Fund and the VIP Trust as
recited in the current registration
statement and reports filed under the
1940 Act.
12. In addition, section 17 Applicants
submit that the proposed Substitution is
consistent with the general purposes of
the 1940 Act as stated in the Findings
and Declaration of Policy in section 1 of
the 1940 Act. The proposed transactions
do not present any of the conditions or
abuses that the 1940 Act was designed
to prevent. Securities to be paid out as
redemption proceeds from the Replaced
Fund and subsequently contributed to
the New Fund to effect the
contemplated in-kind purchases of
shares will be valued in accordance
with the requirements of Rule 17(a)–7.
Therefore, there will be no change in
value to any contract owner as a result
of the Substitution.
Conclusion
For the reasons and upon the facts set
forth above, the Applicants and the
section 17 Applicants believe that the
requested order meets the standards set
forth in section 26(c) and section 17(b),
respectively, and should therefore, be
granted.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–26390 Filed 11–4–08; 8:45 am]
is, for nine months, waiving Investment
Adviser Registration Depository annual
and initial filing fees for all advisers.
Effective Date: The order will
become effective on November 1, 2008.
DATES:
FOR FURTHER INFORMATION CONTACT:
Keith Kanyan, IARD System Manager, at
202–551–6737, Daniel S. Kahl, Branch
Chief, at 202–551–6730, or
Iarules@sec.gov, Office of Investment
Adviser Regulation, Division of
Investment Management, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–5041.
Discusson
Section 204(b) of the Investment
Advisers Act of 1940 (‘‘Advisers Act’’)
authorizes the Commission to require
investment advisers to file applications
and other documents through an entity
designated by the Commission, and to
pay reasonable costs associated with
such filings.1 In 2000, the Commission
designated the Financial Industry
Regulatory Authority Regulation
(‘‘FINRA’’) as the operator of the
Investment Adviser Registration
Depository (‘‘IARD’’) system. At the
same time, the Commission approved,
as reasonable, filing fees.2 The
Commission later required advisers
registered or registering with the SEC to
file Form ADV through the IARD.3 Over
11,000 advisers now use the IARD to
register with the SEC and make state
notice filings electronically through the
Internet.
Commission staff, representatives of
the North American Securities
Administrators Association, Inc.
(‘‘NASAA’’),4 and representatives of
FINRA periodically hold discussions on
IARD system finances. In the early years
of operations, SEC-associated IARD
revenues exceeded projections while
SEC-associated IARD expenses were
lower than estimated, resulting in a
surplus. In 2005, FINRA wrote a letter
to SEC staff recommending a waiver of
annual fees for a one year period. The
Commission concluded that this was
BILLING CODE 8011–01–P
1 15
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IA–2806]
Approval of Investment Adviser
Registration Depository Filing Fees
Securities and Exchange
Commission.
ACTION: Order.
AGENCY:
SUMMARY: The Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
U.S.C. 80b–4(b).
of NASD Regulation, Inc., to
Establish and Maintain the Investment Adviser
Registration Depository; Approval of IARD Fees,
Investment Advisers Act Release No. 1888 (July 28,
2000) [65 FR 47807 (Aug. 3, 2000)]. FINRA is
formerly known as NASD.
3 Electronic Filing by Investment Advisers;
Amendments to Form ADV, Investment Advisers
Act Release No. 1897 (Sept. 12, 2000) [65 FR 57438
(Sept. 22, 2000)].
4 The IARD system is used by both advisers
registering or registered with the SEC and advisers
registered or registering with one or more state
securities authorities. NASAA represents the state
securities administrators in setting IARD filing fees
for state-registered advisers.
2 Designation
E:\FR\FM\05NON1.SGM
05NON1
]]>Agencies
[Federal Register Volume 73, Number 215 (Wednesday, November 5, 2008)]
[Notices]
[Pages 65892-65900]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26390]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-28480; File No. 812-13474]
Allianz Life Insurance Company of North America, et al; Notice of
Application
October 30, 2008.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for an order of approval pursuant to
section 26(c) of the Investment Company Act of 1940, as amended (the
``1940 Act'' or ``Act'') and an order of exemption pursuant to section
17(b) of the Act from Section 17(a) of the Act.
-----------------------------------------------------------------------
Applicants: Allianz Life Insurance Company of North America (``Allianz
Life'') and Allianz Life Insurance Company of New York (``Allianz NY'')
(together the ``Insurance Company Applicants''), their respective
separate accounts Allianz Life Variable Account A (``Allianz Account
A''), Allianz Life Variable Account B (``Allianz Account B''), and
Allianz Life of NY Variable Account C (``Allianz Account C'')
(collectively with the Insurance Company Applicants, the
``Applicants''), and Allianz Variable Insurance Products Trust (the
``VIP Trust'' and collectively with the Applicants, the ``Section 17
Applicants'').
Summary of Application: The Applicants seek an order pursuant to
section 26(c) of the 1940 Act, approving the substitution of certain
securities (the ``Substitution'') issued by the Franklin Templeton
Variable Insurance Products Trust (``FTVIPT'') and held by Allianz
Account A, Allianz Account B, or Allianz Account C (collectively, the
``Separate Accounts'') to support certain variable annuity contracts
and variable life insurance contracts (the ``Contracts'') issued by
Allianz Life and Allianz NY. The section 17 Applicants seek an order
pursuant to section 17(b) of the 1940 Act exempting them to the extent
necessary to permit them to engage in certain in-kind transactions in
connection with the Substitution.
Filing Date: The application was filed on January 11, 2008 and amended
on October 30, 2008.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Secretary of the
Commission and serving Applicants with a copy of the request,
personally or by mail. Hearing requests should be received by the
Commission by 5:30 p.m. on November 24, 2008, 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 requester's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Secretary of the Commission.
ADDRESSES: Secretary, SEC, 100 F Street, NE., Washington, DC 20549-
1090. Applicants, Allianz Life Insurance Company of North America, 5701
Golden Hills Dr., Minneapolis, MN 55416-1297.
FOR FURTHER INFORMATION CONTACT: Sally Samuel, Senior Counsel, or Joyce
M. Pickholz, Branch Chief, Office of Insurance Products, Division of
Investment Management, at (202) 551-6795.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 100 F Street, NE., Washington, DC
20549 (tel. (202) 551-8090).
Applicants' and VIP Trust's Representations
1. The Applicants propose to substitute certain classes of shares
of the AZL Schroder Emerging Markets Equity Fund (the ``New Fund'') for
the corresponding class of shares of the Templeton Developing Markets
Securities Fund (the ``Replaced Fund'') currently held by the Separate
Accounts. The following table shows the share classes of the New Fund
and the Replaced Fund (each, a ``Fund'' and collectively, the
``Funds'') involved in the Substitution:
[[Page 65893]]
----------------------------------------------------------------------------------------------------------------
Replaced fund
New fund (adviser/subadviser) Share classes (adviser) Share classes
----------------------------------------------------------------------------------------------------------------
AZL Schroder Emerging Markets Class 1 Templeton Class 1.
Equity Fund (Allianz Class 2.* Developing Class 2.*
Investment Management LLC/ Markets
Schroder Investment Management Securities Fund
North America Inc.) **. (Templeton Asset
Management Ltd.).
----------------------------------------------------------------------------------------------------------------
\*\ A distribution fee is assessed against assets attributable to this class of shares at the annual rate of
0.25% of the average daily net assets attributable to the class.
\**\ Prior to December 10, 2007, the AZL Schroder Emerging Markets Equity Fund was subadvised by
OppenheimerFunds, Inc. and was known as the AZL Oppenheimer Developing Markets Fund. Effective December 10,
2007, pursuant to an exemptive order issued to the VIP Trust on September 17, 2002, the VIP Trust replaced
OppenheimerFunds, Inc. with Schroder Investment Management North America Inc. as subadviser to the Fund.
2. The New Fund is a series of the VIP Trust, a Delaware statutory
trust. The VIP Trust is registered as an open-end management investment
company under the 1940 Act (File No. 811-9491) and its shares are
registered as securities under the Securities Act of 1933, as amended
(the ``1933 Act'') (File No. 333-83423).
3. Shares of the VIP Trust are sold to separate accounts of Allianz
Life and Allianz NY for the purpose of funding variable annuity
contracts and variable life insurance policies. The New Fund, as well
as all other funds offered by the VIP Trust, is managed by Allianz
Investment Management LLC (``AZIM''), a wholly owned subsidiary of
Allianz Life that was formerly known as Allianz Life Advisers, LLC.
4. The following table shows the inception date and net assets at
December 31, 2007 for each class of shares of the New Fund:
------------------------------------------------------------------------
Net assets at December
New fund Inception date 31, 2007
------------------------------------------------------------------------
AZL Schroder Emerging Markets
Equity Fund
Class 1.................. 5/6/07 $359,359.
Class 2.................. 5/1/06 $249.2 million.
------------------------------------------------------------------------
5. Class 1 and Class 2 shares are substantially identical, except
that Class 1 shares are not assessed a 12b-1 fee while Class 2 shares
are assessed a 12b-1 fee at an annual rate of 0.25% of average daily
net assets attributable to Class 2 shares, which is the maximum 12b-1
fee permitted under the New Fund's Distribution Plan. Class 1 shares
are currently available to owners of certain Contracts that are no
longer offered for sale. Class 2 shares are currently available to
owners of certain Contracts that are currently offered for sale. Both
Class 1 and Class 2 shares are included in the proposed Substitution.
6. Prior to December 10, 2007, the New Fund was subadvised by
OppenheimerFunds, Inc. and was known as the AZL Oppenheimer Developing
Markets Fund. Effective December 10, 2007, the VIP Trust replaced
OppenheimerFunds, Inc. with Schroder Investment Management North
America Inc. (``SIMNA'') as the subadviser to the New Fund.
7. The Replaced Fund is a series of FTVIPT. Shares of FTVIPT are
registered as securities under the 1933 Act (File No. 033-23493). The
Replaced Fund is managed by Templeton Asset Management Ltd., which is
not an affiliate of the Insurance Company Applicants.
8. The following table shows the inception date and net assets at
December 31, 2007, for each class of shares of the Replaced Fund:
------------------------------------------------------------------------
Net assets at December
Replaced fund Inception date 31, 2007
------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund
Class 1.................. 1/1/97 $753.8 million.
Class 2.................. 5/1/97 $1.1 billion.
------------------------------------------------------------------------
9. Class 1 and Class 2 shares of the Replaced Fund are currently
available under certain Contracts issued by the Insurance Company
Applicants. Class 1 and Class 2 shares are substantially identical,
except that Class 1 shares are not assessed a 12b-1 fee while Class 2
shares are assessed a 12b-1 fee at an annual rate of 0.25% of average
daily net assets attributable to Class 2 shares. Class 1 shares are
currently available to owners of certain Contracts that are no longer
offered for sale. Class 2 shares are currently available to owners of
certain Contracts that are currently offered for sale. Both Class 1 and
Class 2 shares are included in the proposed Substitution.
10. Pursuant to a ``manager of managers'' exemptive order issued by
the Commission pursuant to section 6(c) of the 1940 Act providing an
exemption from section 15(a) of the 1940 Act and Rule 18f-2 under the
1940 Act (Order No. 25734, dated September 17, 2002), AZIM selects and
manages subadvisers for the various series of the VIP Trust, subject to
the oversight of the Board of Trustees of the VIP Trust, without
obtaining shareholder approval (the ``Manager of Managers Order''). The
relief granted in the Manager of Managers Order extends to the New
Fund. The New Fund is offered to contract owners via a prospectus
containing disclosure (1) describing the existence, substance, and
effect of the Manager of Managers Order; (2) holding the New Fund out
to the public as employing the management structure described in the
application for the Manager of Managers Order; and (3) explaining that
AZIM has the ultimate responsibility (subject to oversight by the Board
of Trustees of the VIP Trust) to oversee the subadvisers and recommend
their hiring, termination, and replacement. The New Fund's
[[Page 65894]]
prospectus will be provided to each affected contract owner prior to
the Substitution.
11. Subaccounts investing in Class 1 shares of the Replaced Fund
and Class 1 shares of the New Fund are currently available only to
owners of certain Contracts that are no longer offered for sale by the
Insurance Company Applicants. Pursuant to the proposed Substitution,
the Insurance Company Applicants will replace Class 1 shares of the
Replaced Fund held in its subaccounts on the date of the Substitution
with Class 1 shares of the New Fund.
12. Subaccounts investing in Class 2 shares of the Replaced Fund
and Class 2 shares of the New Fund are currently available to owners of
certain Contracts currently offered for sale by the Insurance Company
Applicants. Pursuant to the proposed Substitution, the Insurance
Company Applicants will replace Class 2 shares of the Replaced Fund
held in its subaccounts on the date of the Substitution with Class 2
shares of the New Fund.
13. It is currently anticipated that the Substitution will occur as
soon as practicable following receipt of the Order of the Commission
requested herein (the ``Substitution Date''). After the Substitution
Date, subaccounts investing in the Replaced Fund will no longer be
available under the Contracts to any contract owner.
14. Allianz Life is a stock life insurance company organized under
the laws of the state of Minnesota in 1896. Allianz NY is a stock life
insurance company organized under the laws of the state of New York on
September 21, 1982. Allianz Life and Allianz NY are subsidiaries of
Allianz SE, a ``Societas Europaea'' or European stock corporation
headquartered in Munich, Germany.
15. Allianz Life is the depositor and sponsor of Allianz Account A
and Allianz Account B, and Allianz NY is the depositor and sponsor of
Allianz Account C. Each of the Separate Account Applicants meets the
definition of a ``separate account'' in Rule 0-1(e) under the 1940 Act.
16. Allianz Account A is a segregated asset account of Allianz
Life. Allianz Account A was established by Allianz Life on May 31,
1985, under Minnesota insurance laws. Allianz Account A is used to fund
certain variable life insurance policies issued by Allianz Life.
Allianz Account A is currently divided into a number of subaccounts,
each of which invests in a specific underlying registered investment
company or portfolio thereof (each an ``Investment Option''). Allianz
Account A is registered as a unit investment trust under the 1940 Act
(File No. 811-04965). Allianz Life does not currently issue any new
Contracts that allow contract owners to invest in any of the
subaccounts of Allianz Account A.
17. Allianz Account B is a segregated asset account of Allianz
Life. Allianz Account B was established by Allianz Life on May 31,
1985, under Minnesota insurance laws. Allianz Account B is used to fund
certain variable annuity contracts issued by Allianz Life. Allianz
Account B is divided into a number of subaccounts, each of which
invests in a specific Investment Option. Allianz Account B is
registered as a unit investment trust under the 1940 Act (File No. 811-
05618).
18. Allianz Account C is a segregated asset account of Allianz NY.
Allianz Account C was established by Allianz NY on February 26, 1988,
under New York insurance laws. Allianz Account C is used to fund
certain variable annuity contracts issued by Allianz NY. Allianz
Account C is divided into a number of subaccounts, each of which
invests in a specific Investment Option. Allianz Account C is
registered as a unit investment trust under the 1940 Act (File No. 811-
05716).
19. The Contracts are variable annuity contracts and variable life
insurance policies. Allianz Life currently issues individual deferred
variable annuity contracts and has previously issued immediate variable
annuity contracts and variable life insurance policies. Allianz NY
issues individual deferred variable annuity contracts offered for sale
in New York.
20. Allianz Life Financial Services, LLC (``Allianz Life
Financial''), a Minnesota limited liability company and a wholly owned
subsidiary of Allianz Life, serves as the principal underwriter of the
Contracts. Allianz Life Financial is registered as a broker dealer with
the Commission under the Securities Exchange Act of 1934 (the ``1934
Act'') as well as with the securities commissions in the states in
which it operates. Allianz Life Financial does not itself sell the
Contracts on a retail basis. Rather, Allianz Life Financial enters into
selling agreements with other broker-dealers registered under the 1934
Act for the sale of the Contracts. These selling firms include third
party broker/dealers and Questar Capital Corporation, an affiliated
broker/dealer.
21. Currently, Allianz Life has no effective registration
statements for Contracts sponsored by Allianz Account A. The table
below shows effective registration statements with the Commission for
Contracts sponsored by Allianz Account B that offer the Replaced Fund
as an Investment Option:
----------------------------------------------------------------------------------------------------------------
Separate account Registration No. Contract name Type of contract
----------------------------------------------------------------------------------------------------------------
Allianz Account B..................... 333-82329 Allianz Alterity (Class 2 Variable Deferred
shares). Annuity.
Allianz Account B..................... 333-90260 Allianz High Five (Class Variable Deferred
2 shares). Annuity.
Allianz Account B..................... 333-111049 Allianz High Five Bonus Variable Deferred
(Class 2 shares). Annuity.
Allianz Account B..................... 333-120181 Allianz High Five L Variable Deferred
(Class 2 shares). Annuity.
Allianz Account B..................... 333-95729 Allianz Rewards (Class 2 Variable Deferred
shares). Annuity.
Allianz Account B..................... 33-23035 Valuemark II (Class 1 Variable Deferred
shares). Annuity.
Allianz Account B..................... 33-72046 Valuemark III (Class 1 Variable Deferred
shares). Annuity.
Allianz Account B..................... 333-06709 Valuemark IV (Class 1 Variable Deferred
shares). Annuity.
----------------------------------------------------------------------------------------------------------------
22. In addition, Allianz Life has the following registration
statements that are effective, but no longer updated, for Contracts
sponsored by Allianz Account A and Allianz Account B that are no longer
offered for sale (the ``A and B Great Wested Contracts'') but which
offer the Replaced Fund as an Investment Option:
----------------------------------------------------------------------------------------------------------------
Separate account Registration No. Contract Name Type of contract
----------------------------------------------------------------------------------------------------------------
Allianz Account A..................... 33-11158 Allianz ValueLife (Class Flexible Premium Variable
1 shares). Universal Life.
[[Page 65895]]
Allianz Account B..................... 333-63719 USAllianz Charter (Class Variable Deferred
2 shares). Annuity.
Allianz Account B..................... 333-101812 USAllianz Charter II Variable Deferred
(Class 2 shares). Annuity.
Allianz Account B..................... 333-47886 USAllianz Dimensions Variable Deferred
(Class 2 shares). Annuity.
Allianz Account A..................... 333-60206 USAllianz LifeFund (Class Flexible Premium Variable
2 shares). Universal Life.
Allianz Account B..................... 33-76190 Valuemark Income Plus Variable Immediate
(Class 1 shares). Annuity.
Allianz Account A..................... 33-15464 Valuemark Life (Class 1 Single Premium Variable
shares). Life.
----------------------------------------------------------------------------------------------------------------
23. Currently Allianz NY has the following effective registration
statements with the Commission for Contracts sponsored by Allianz
Account C that offer the Replaced Fund as an Investment Option:
----------------------------------------------------------------------------------------------------------------
Separate account Registration No. Contract name Type of contract
----------------------------------------------------------------------------------------------------------------
Allianz Account C..................... 333-19699 Allianz Advantage NY Variable Deferred
(Class 2 shares). Annuity.
Allianz Account C..................... 333-105274 Allianz Charter II NY Variable Deferred
(Class 2 shares). Annuity.
Allianz Account C..................... 333-75718 Allianz Opportunity NY Variable Deferred
(Class 2 shares). Annuity.
----------------------------------------------------------------------------------------------------------------
24. In addition, Allianz NY has the following registration
statements that are effective, but no longer updated, for Contracts
sponsored by Allianz Account C (the ``C Great Wested Contracts'') that
are no longer offered for sale but which offer the Replaced Fund as an
Investment Option:
----------------------------------------------------------------------------------------------------------------
Separate account Registration No. Contract name Type of contract
----------------------------------------------------------------------------------------------------------------
Allianz Account C..................... 33-26646 Valuemark II NY (Class 1 Variable Deferred
shares). Annuity.
Allianz Account C..................... 333-19699 Valuemark IV NY (Class 1 Variable Deferred
shares). Annuity.
----------------------------------------------------------------------------------------------------------------
25. The Contracts allow contract owners to allocate premium and
contract value among the subaccounts investing in a large number of
Investment Options in a wide variety of asset categories that are
managed by a large number of asset managers. The exact number of
Investment Options available varies somewhat from Contract to Contract,
depending on when the Contracts were first offered, whether the
Contracts are currently offered for sale, which separate account issued
the Contract, product design, and other similar factors. All of the
Contracts that are currently offered for sale offer 75 Investment
Options. Both the A and B Great Wested Contracts and the C Great Wested
Contracts offer a minimum of 34 Investment Options. The number of
Investment Options available in the Contracts affected by the
Substitution is shown in the Application.
26. Under the Contracts, the Insurance Company Applicants reserve
the right, subject to regulatory approval, to substitute one of the
Investment Options with another Investment Option after appropriate
notice. Moreover, the Contracts permit the Insurance Company Applicants
to limit allocation of purchase payments to one or more subaccounts
that invest in an Investment Option. The prospectuses or statements of
additional information for the Contracts also contain appropriate
disclosure of these rights. Thus, subject to regulatory approval, the
Contracts permit the Insurance Company Applicants to stop accepting
purchase payments into one or more Investment Options and/or to
substitute the shares representing an Investment Option held in a
subaccount for the shares representing another Investment Option.
27. The proposed Substitution is part of an overall business plan
of the Insurance Company Applicants to make their respective products
more efficient to monitor and administer and more competitive (both in
terms of new sales and the retention of existing business). The
Insurance Company Applicants believe that more concentrated and
streamlined operations for Investment Options will result in increased
operational and administrative efficiencies and economies of scale for
the Insurance Company Applicants. In particular, the Insurance Company
Applicants feel that concentrating the number of non-affiliated asset
managers that advise or subadvise the Investment Options available
through the Contracts will simplify the administration of the Contracts
with regard to communications with asset managers and contract owners,
and simplify the preparation of various reports and disclosure
documents. Furthermore, the Insurance Company Applicants feel that by
reducing the number of non-affiliated asset managers that manage
Investment Options underlying their Contracts and increasing the
Investment Options for which AZIM serves as the investment manager,
they will increase their ability to effectively manage the Investment
Options available to contract owners. Because AZIM operates pursuant to
the Manager of Managers Order, the replacement of portfolio managers or
subadvisers when appropriate could be effected more efficiently and the
need for fund changes that may affect contract owners may be reduced,
thereby facilitating appropriate long-term strategic planning for
contract owners.
28. For these reasons and the reasons discussed below, the
Applicants believe that substituting the New Fund for the Replaced Fund
is appropriate and in the best interests of the contract owners.
29. The Insurance Company Applicants believe that the New Fund is
an appropriate replacement for the Replaced Fund because its investment
objective and principal investment policies are substantially similar
to those of the Replaced Fund. In addition, the principal investment
risks of the Replaced Fund and the New Fund are substantially similar.
Comparisons of the investment objectives, principal investment policies
and principal investment risks of the Funds are set forth in the
Application.
[[Page 65896]]
30. The following chart compares the management fees and the total
operating expenses (before and after any waivers and reimbursements)
for the year ended December 31, 2007, expressed as an annual percentage
of average daily net assets, of the Replaced Fund and the New Fund.
----------------------------------------------------------------------------------------------------------------
Templeton developing markets AZL schroder emerging markets
securities fund equity fund
---------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
(percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Management Fee.................................. 1.23 1.23 * 1.23 * 1.23
Distribution (12b-1) Fees....................... 0.00 0.25 0.00 0.25
Other Expenses.................................. 0.25 0.25 0.48 0.48
Acquired Fund Fees and Expenses................. 0.00 0.00 0.00 0.00
Total Annual Fund Operating Expenses............ 1.48 1.73 1.71 1.96
Fee Waiver...................................... 0.00 0.00 ** 0.31 ** 0.31
Net Annual Fund Operating Expenses.............. 1.48 1.73 ** 1.40 ** 1.65
----------------------------------------------------------------------------------------------------------------
* AZIM and the Fund have entered into a written agreement whereby AZIM has voluntarily reduced the management
fee to 0.95% through April 30, 2009.
** AZIM and the AZL Schroder Emerging Markets Equity Fund have entered into a written contract limiting
operating expenses to 1.40% and 1.65% for Class 1 and Class 2 shares, respectively through April 30, 2009.
AZIM and the AZL Schroder Emerging Markets Equity Fund have agreed to limit Fund operating expenses, net of
acquired fund fees and expenses, to an amount not greater than 1.48% and 1.73% for Class 1 and Class 2 shares
respectively for 24 months from the date of the Substitution.
31. The following table shows the assets and performance of the
Funds for the years shown:
----------------------------------------------------------------------------------------------------------------
Net assets (M)
---------------------------------------------------------------
At December 31, 2007 At December 31, 2006
---------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
----------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund.... $753.8 $1,090.6 $749.1 $857.5
AZL Schroder Emerging Markets Equity Fund *..... (1) 0.4 249.2 (1) N/A (2) 93.7
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Annual total returns
---------------------------------------------------------------
2007 2006
---------------------------------------------------------------
Class 1 Class 2 Class 1 Class 2
(percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund.... 29.09 28.78 28.43 28.09
AZL Schroder Emerging Markets Equity Fund *..... (1) (3) 19.23 30.32 (1) N/A (2) (4) 8.65
----------------------------------------------------------------------------------------------------------------
* Prior to December 10, 2007, the AZL Schroder Emerging Markets Equity Fund was subadvised by OppenheimerFunds,
Inc. and was known as the AZL Oppenheimer Developing Markets Fund.
\1\ Class 1 shares of the AZL Schroder Emerging Markets Equity Fund commenced operations on May 6, 2007.
\2\ Class 2 shares of the AZL Schroder Emerging Markets Equity Fund commenced operations on May 1, 2006.
\3\ Annualized for the period from commencement of operations on May 6, 2007, through December 31, 2007.
\4\ Annualized for the period from commencement of operation on May 1, 2006, through December 31, 2006.
32. Applicants hereby request the Commission's approval to effect
the substitution of shares of the New Fund for shares of the Replaced
Fund as follows:
Class 1 shares of the AZL Schroder Emerging Markets Equity
Fund for Class 1 shares of the Templeton Developing Markets Securities
Fund; and
Class 2 shares of the AZL Schroder Emerging Markets Equity
Fund for Class 2 shares of the Templeton Developing Markets Securities
Fund.
33. At the close of business on the Substitution Date, Allianz Life
and Allianz NY will each redeem shares of the Replaced Fund held by
their Separate Accounts in kind and apply the proceeds of such
redemptions to the purchase of shares of the New Fund. Thus, after the
Substitution, each subaccount of the Separate Accounts previously
holding shares of the Replaced Fund will hold shares of the New Fund.
34. Redemption requests and purchase orders will be placed
simultaneously so that redemption of Replaced Fund shares and purchase
of New Fund shares will both occur at the price for such shares
computed as of the close of business on the Substitution Date in a
manner consistent with Rule 22c-1 under the 1940 Act. As a result, the
full net asset value of the Replaced Fund shares held by the Separate
Account Applicants will be reflected in the contract owners' contract
values following the Substitution, without reduction for brokerage or
other such fees or charges. All expenses incurred in connection with
the Substitution, including legal, accounting, transactional, and other
fees and expenses, including brokerage commissions, will be paid by
Allianz Life, Allianz NY, or the manager of the New Fund. Accordingly,
contract value attributable to contract owners then invested in the
Replaced Fund will remain fully invested at all times, and the
Substitution will take place at relative net asset value with no change
in the amount of any contract owner's contract value, death benefit, or
in the
[[Page 65897]]
dollar value of his or her investment in the applicable Separate
Account.
35. Affected contract owners will not incur any fees or charges in
connection with the Substitution so that the net asset value of
redeemed shares of the Replaced Fund held by the Separate Account
Applicants will be reflected in the contract owners' contract values
following the Substitution. Moreover, neither the obligations of the
respective Insurance Company Applicants under the Contracts nor the
rights of contract owners will be altered in any way by the
Substitution. The Substitution will not impose any tax liability or
have any adverse tax consequences on contract owners. The Substitution
will not cause Contract fees and charges currently being paid by
existing owners of Contracts to be greater after the Substitution than
they were before the Substitution. For a period of at least 30 days
following the Substitution, neither Allianz Life nor Allianz NY will
exercise any right it may have under the Contracts to impose
restrictions on transfers, except pursuant to any Investment Option
allocation restrictions under the Contracts. One exception to this
would be restrictions that Allianz Life or Allianz NY may impose to
deter or prevent ``market timing'' activities by owners of Contracts or
their agents.
36. The Insurance Company Applicants and VIP Trust represent that
AZIM and the VIP Trust have entered into a written contract whereby
during the 24 months following the Substitution Date, the annualized
total net operating expenses, net of any acquired fund fees and
expenses, of the New Fund (taking into account applicable fee waivers
and expense reimbursements) will not exceed the total net operating
expenses, net of any acquired fund fees and expenses, of the Replaced
Fund for the fiscal year ended December 31, 2007. In addition, for the
24 months following the Substitution Date, the Insurance Company
Applicants will not increase asset-based fees and charges for the
Contracts outstanding on the Substitution Date. Thereafter, expenses
for the New Fund will vary from year to year and may exceed those of
the Replaced Fund.
37. The Insurance Company Applicants mailed a Notice of
Substitution (the ``Notice'') to affected contract owner stating that
during the period from the date of the Notice through the date 30 days
after the Substitution (the ``Free Transfer Period''), the respective
Insurance Company Applicants will allow the affected contract owners to
make one transfer of contract value held in each subaccount investing
in the Replaced Fund (before the Substitution) or New Fund (after the
Substitution) to one or more Investment Options available pursuant to
the Contracts without charge and without assessing transfer fees. Such
a transfer also will not be counted as a transfer request under any
contractual provisions of the Contracts that limit the number of
transfers that may be made without charge.
38. Under the Manager of Managers Order, subject to the approval of
its Board of Trustees, the VIP Trust may retain one or more subadvisers
for any of its Funds without the approval of shareholders of the Fund.
However, after the Substitution Date, Applicants and VIP Trust
represent that the VIP Trust will not retain any new subadviser for the
New Fund, or otherwise rely on the Manager of Managers Order in
connection with the New Fund, without first obtaining shareholder
approval of either: (1) The new subadviser or (2) the New Fund's
ability to rely on the Manager of Managers Order.
39. The Notice was mailed to all affected owners on August 11-12,
2008. The Notice informed contract owners of each of the Contracts that
the Applicants have filed the Application seeking approval of the
Substitution. The Notice set forth the anticipated Substitution Date
and advised affected contract owners that contract values allocated to
subaccounts investing in shares of the Replaced Fund will be
transferred to subaccounts investing in shares of the New Fund, without
charge (including sales charges or surrender charges) and without
counting toward the number of transfers that may be permitted without
charge, on the Substitution Date. The Notice also stated that, during
the Free Transfer Period, affected contract owners may make one
transfer of contract value from each subaccount investing in the
Replaced Fund (before the Substitution) or the New Fund (after the
Substitution) to one or more other subaccount(s), subject to any
Investment Option allocation restrictions under their Contract, without
charge and without the transfer counting against any limitations on
transfers. Further, prior to the Substitution, all affected contract
owners will receive a copy of the most recent prospectus for the New
Fund.
40. Within five days following the Substitution, the Insurance
Company Applicants will send a written notice to affected contract
owners stating that the Substitution was carried out and reiterating
the information set forth in the Notice.
Applicants' Legal Analysis
1. Section 26(c) of the 1940 Act provides as follows: It shall be
unlawful for any depositor or trustee of a registered unit investment
trust holding the security of a single issuer to substitute another
security for such security unless the Commission shall have approved
such substitution. The Commission shall issue an order approving such
substitution if the evidence establishes that it is consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of this title.
2. The purposes, terms, and conditions of the Substitution are
consistent with the principles and purposes of section 26(c) and do not
entail any of the abuses that section 26(c) is designed to prevent.
Contract owners will not be assessed charges in connection with the
Substitution and their annual fund net total operating expenses are
expected to remain the same or decrease. In addition, to the extent a
contract owner does not wish to participate in the Substitution, he or
she is free to make one transfer to any other option available under
the relevant Contract at any time prior to the date of the Substitution
or during the 30-day period following the date of the Substitution
without any transfer fee and without that transfer counting as a
transfer request under any contractual provisions of the Contracts that
limit the number of transfers that may be made without charge.
Moreover, the Contracts have features that provide adequate protection
to contract owners. These features include: (1) A significant number of
different Investment Options; (2) Investment Options that are
reasonably diversified; (3) Investment Options that are reasonably
seasoned; (4) reasonable transferability between Investment Options;
(5) investment choices that include an option that is intended to
reduce or eliminate fluctuation of principal; and (6) reasonable
liquidity in the form of free partial withdrawal rights.
3. In addition, contract owners will be substituted into the New
Fund whose investment objective, principal investment policies, and
risks will be substantially similar to those of the Replaced Fund, with
net total operating expenses that are anticipated to be equal to or
less than those of the Replaced Fund after applicable fee waivers and
expense reimbursements. Like the Class 1 shares of the Replaced Fund
which are not assessed a 12b-1 fee, the corresponding Class 1 shares of
the New Fund will not be assessed a 12b-1 fee.
[[Page 65898]]
4. The following chart summarizes the similarities and differences
between the Replaced Fund and the New Fund:
------------------------------------------------------------------------
Templeton AZL Schroder
developing markets emerging markets
securities fund equity fund
------------------------------------------------------------------------
Net Total Operating Expenses (12/ 1.48% (Class 1)... 1.40% (Class 1).
31/2007). 1.73% (Class 2)... 1.65% (Class 2).
Investment Objectives........... Long-term capital Capital
appreciation. Appreciation.
Investment Policies (summary)... The Fund invests The Fund invests
at least 80% of at least 80% of
its net assets in its net assets,
emerging market plus any
investments. borrowings for
investment
purposes, in
equity securities
of companies the
Fund's subadviser
believes to be
``emerging
market'' issuers.
Risks........................... Stock Risk; Value Market Risk;
Style Investing; Selection Risk;
Foreign Capitalization
Securities; Risk; Foreign
Smaller and Risk; Emerging
Midsize Markets Risk;
Companies; Currency Risk;
Country, Sector Market Risk;
or Industry Derivatives Risk;
Focus; Liquidity. Convertible
Securities Risk;
Investments in
Pooled Vehicles
Risk; Liquidity
Risk; Initial
Public Offerings
Risk.
Type of Advisory Services....... Managed by Subadvised by
Templeton Asset Schroder
Management Ltd. Investment
Management North
America Inc.
Total Annual Return for period
ended December 31, 2007
Class 1..................... 29.09%............ 19.23% *.
Class 2..................... 28.78%............ 30.32%.
Assets Under Management at Dec.
31, 2007
Class 1..................... $753.8 million **. $0.4 million ****.
Class 2..................... $1.1 billion **... $249.2 million.
------------------------------------------------------------------------
* Annualized for the period from commencement of operations on May 1,
2007 through December 31, 2007.
** Assets held in the Separate Accounts on December 31, 2007, were $85.3
million for Class 1 shares and $268.3 million for Class 2 shares.
*** Class 1 shares of the AZL Schroder Emerging markets Equity Fund
commenced operations on May 6, 2007.
5. For a period of 24 months from the date of the Substitution, the
New Fund ( AZL Schroder Emerging Markets Equity Fund)) will be subject
to an expense cap limiting the net total operating expenses for the New
Fund to a maximum of 1.48% for Class 1 shares and 1.73% for Class 2
shares, respectively. These expense caps are equal to the net total
operating expenses for Class 1 and Class 2 shares of the Replaced Fund
(Templeton Developing Markets Securities Fund) for the fiscal year
ended December 31, 2007. No 12b-1 fees are assessed to Class 1 shares
of either the Replaced Fund or the New Fund. Identical 12b-1 fees of
0.25% of average daily net assets are assessed to Class 2 shares of
both the Replaced Fund and the New Fund.
6. The investment objectives and policies are substantially similar
for both Funds since both generally invest in common stocks of
companies in emerging markets. The risks listed are very similar for
both Funds and are consistent with the risks generally applicable to
investing in emerging market equity funds.
7. In addition to substantially similar investment objectives,
principal investment policies and risks, as well as anticipated equal
or lower net total operating expenses, the advisory services that are
provided to the New Fund by its subadviser are comparable to the types
of advisory services currently provided to the Replaced Fund by its
investment adviser. Moreover, because the New Fund operates pursuant to
the Manager of Managers Order, Applicants believe that the proposed
Substitution will provide protection to contract owners by giving AZIM
the flexibility to change the subadviser of the New Fund should such a
change become warranted or advisable, provided that subsequent to the
Substitution, AZIM first obtains shareholder approval of either: (1)
The new subadviser or (2) the New Fund's ability to rely on the Manager
of Managers Order.
Terms and Conditions of Section 26(c) Relief
1. Applicants submit that the Substitution does not present the
type of costly forced redemption or other harms that section 26(c) was
intended to guard against and is consistent with the protection of
investors and the purposes fairly intended by the 1940 Act. As noted
above, the Substitution is consistent with contract owners' objectives
and risk expectations because the investment objective, principal
investment policies and risks of the New Fund are substantially similar
to those of the Replaced Fund. In addition, the net total operating
expenses of the New Fund are anticipated to be equal to or less than
those of the Replaced Fund, after applicable fee waivers and expense
reimbursements that will be in place for the New Fund for a period of
24 months following the Substitution.
2. As noted above, the Contracts contain features that provide
adequate protection to contract owners in the event of a substitution.
Moreover, the Substitution will be subject to the following terms and
conditions: (1) A contract owner may request that his or her contract
value be reallocated to another Investment Option, subject to any
Investment Option allocation restrictions under their Contract, at any
time during the Free Transfer Period without charge. The Free Transfer
Period provides sufficient time for contract owners to reconsider their
Investment Options; (2) the Substitution will be at the net asset value
of the respective shares, without the imposition of any transfer,
brokerage or similar charge; (3) neither the contract owners, the
Replaced Fund, nor the New Fund will bear any costs of the
Substitution, and all legal, accounting, and transactional costs and
any brokerage or other costs incurred in the Substitution will be paid
by the Insurance Company Applicants or the manager of the New Fund, and
accordingly, the Substitution will have no impact on the contract
owners' contract values; (4) the Substitution will in no way alter the
contractual obligations of the Insurance Company Applicants or the
rights and privileges
[[Page 65899]]
of contract owners under the Contracts; and (5) the Substitution will
in no way alter the tax benefits to contract owners.
3. The Applicants, on the basis of the facts and circumstances
described herein, have determined that it is in the best interests of
contract owners to substitute shares of the Replaced Fund with shares
of the New Fund.
4. Applicants request an Order of the Commission pursuant to
Section 26(c) of the 1940 Act approving the Substitution on the terms
set forth in this Application. Applicants believe, for all of the
reasons stated above, that the Substitution is consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the 1940 Act.
Section 17(b) Relief
1. The section 17 Applicants also request that the Commission issue
an order pursuant to section 17(b) of the 1940 Act exempting them from
section 17(a) of the 1940 Act to the extent necessary to permit them to
carry out the Substitution through in-kind purchases and sales of the
New Fund shares.
2. Section 17(a)(1) of the 1940 Act prohibits any affiliated person
of a registered investment company, or an affiliated person of an
affiliated person, acting as principal, from selling any security or
other property to such registered investment company. Section 17(a)(2)
of the 1940 Act prohibits any of the persons described above, acting as
principal, from purchasing any security or other property from such
registered investment company.
3. The Section 17 Applicants may be considered affiliates of the
New Fund based upon the definition of ``affiliated person'' in section
2(a)(3) of the 1940 Act. Shares of the funds of the VIP Trust are held
solely by the Separate Accounts. Because shares held by a separate
account of an insurance company are legally owned by the insurance
company, Allianz Life and Allianz NY and their affiliates collectively
own of record all of the shares of the funds of the VIP Trust,
including the New Fund. Further, AZIM, an affiliated person of the VIP
Trust by virtue of section 2(a)(3)(E) of the 1940 Act, is a wholly
owned subsidiary of Allianz Life. For these reasons, the VIP Trust and
the New Fund are arguably under the control of Allianz Life and Allianz
NY notwithstanding the fact that contract owners may be considered the
beneficial owners of those shares held in the Separate Accounts. If the
VIP Trust and the New Fund are under the control of Allianz Life and
Allianz NY, then each of Allianz Life and Allianz NY, or any person
controlling Allianz Life and Allianz NY, or any person under common
control with Allianz Life and Allianz NY, is an affiliated person of
the VIP Trust and the New Fund. Similarly, if the VIP Trust and the New
Fund are under the control of Allianz Life and Allianz NY, then the VIP
Trust and the New Fund are affiliated persons of Allianz Life and
Allianz NY, and of any persons that control Allianz Life and Allianz NY
or are under common control with Allianz Life and Allianz NY.
4. At the close of business on the Substitution Date, the Insurance
Company Applicants will redeem shares of the Replaced Fund either in-
kind or in cash and use the proceeds of such redemptions to purchase
shares of the New Fund, with each subaccount of the applicable Separate
Account investing the proceeds of its redemption from the Replaced Fund
in the New Fund. Thus, the proposed transactions may involve a transfer
of portfolio securities by the Replaced Fund to Allianz Life and
Allianz NY. Immediately thereafter, Allianz Life and Allianz NY would
purchase shares of the New Fund with the portfolio securities received
from the Replaced Fund. This aspect of the Substitution may be deemed
to involve one or more sales by Allianz Life or Allianz NY of
securities or other property to the New Fund, and could therefore be
viewed as being prohibited by section 17(a). Accordingly, the section
17 Applicants seek relief from section 17(a) for the in-kind purchases
and sales of the New Fund shares. The section 17 Applicants do not
believe that the redemption of shares of the Replaced Fund in
connection with the Substitution would involve a transaction with a
registered investment company of which it is an affiliated person. The
redemption of shares of the Replaced Fund will be carried out in
accordance with the Signature Financial Group no-action letter
(publicly available December 28, 1999).
5. Any in-kind redemptions and purchases for purposes of the
Substitution will be effected in a manner consistent with the
investment objectives and policies of the Replaced Fund and the New
Fund. Subject to the oversight of AZIM, the subadviser of the New Fund
will review the securities holdings of the Replaced Fund and determine
which of the Replaced Fund's portfolio holdings would be suitable
investments for the New Fund in the overall context of the New Fund's
investment objective and policies and consistent with its management of
the New Fund, and will accept only those securities as consideration
for shares that it would have acquired for each such Fund in a cash
transaction. The section 17 Applicants represent that these portfolio
securities will be of the type and quality that the New Fund would have
acquired with the proceeds from share sales had the shares been sold
for cash.
6. The section 17 Applicants state that any securities to be paid
out as redemption proceeds and subsequently contributed to the New Fund
to effect the contemplated in-kind purchases of shares will be valued
based on the procedures established by the board of VIP Trust. The
redeeming and purchasing values will be the same. Consistent with Rule
17a-7(d) under the 1940 Act, no brokerage commissions, fees, or other
remuneration will be paid by the Replaced Fund or the New Fund in
connection with the in-kind transactions. If AZIM declines to accept
particular portfolio securities of the Replaced Fund for purchase in-
kind of shares of the New Fund, those positions will be liquidated by
the Replaced Fund and shares of the New Fund will be purchased with
cash.
7. Section 17(b) of the 1940 Act provides that the Commission may,
upon application, grant an order exempting any transaction from the
prohibitions of section 17(a) if the evidence establishes that: (1) The
terms of the proposed transaction, including the consideration to be
paid or received, are reasonable and fair and do not involve
overreaching on the part of any person concerned; (2) the proposed
transaction is consistent with the policy of each registered investment
company concerned, as recited in its registration statement and records
found under the 1940 Act; and (3) the proposed transaction is
consistent with the general purposes of the 1940 Act.
8. The section 17 Applicants submit that the terms of the
Substitution, including the consideration to be paid and received, are
reasonable and fair and do not involve overreaching on the part of any
person concerned principally because the transactions will conform with
all but one of the conditions enumerated in Rule 17a-7 under the 1940
Act. The use of in-kind transactions will not cause contract owner
interests to be diluted. The proposed transactions will take place at
relative net asset value in conformity with the requirements of section
22(c) of the 1940 Act and Rule 22c-1 thereunder with no change in the
amount of any contract owner's contract value or death benefit or in
the dollar value of his or her investment in any of the Separate
Accounts. The proposed transaction
[[Page 65900]]
cannot be effected at a price that is disadvantageous to either the
Replaced Fund or the New Fund. Contract owners will not suffer any
adverse tax consequences as a result of the Substitution. Fees and
charges under the Contracts will not increase because of the
Substitution. Even though they may not rely on Rule 17a-7 under the
1940 Act, the section 17 Applicants submit that the Rule's conditions
outline the type of safeguards that result in transactions that are
fair and reasonable to registered investment company participants and
preclude overreaching in connection with an investment company by its
affiliated persons.
9. The board of the VIP Trust has adopted procedures, as required
by paragraph (e)(1) of Rule 17a-7 under the 1940 Act, pursuant to which
the New Fund may purchase and sell securities to and from its
affiliates. The section 17 Applicants will carry out the proposed in-
kind purchases in conformity with all of the conditions of Rule 17a-7
and the New Fund's procedures thereunder, except that the consideration
paid for the securities being purchased or sold may not be entirely
cash. Nevertheless, the circumstances surrounding the proposed
Substitution will be such as to offer to the New Fund the same degree
of protection from overreaching that Rule 17a-7 provides to the New
Fund generally in connection with its purchase and sale of securities
under that Rule in the ordinary course of its business. In particular,
Allianz Life and Allianz NY (or any of their affiliates) cannot effect
the proposed transactions at a price that is disadvantageous to the New
Fund. Although the transactions may not be entirely for cash, each will
be effected based upon (1) the independent market price of the
portfolio securities valued as specified in paragraph (b) of Rule 17a-
7, and (2) the net asset value per share of each Fund involved valued
in accordance with the procedures disclosed in its respective
registration statement and as required by Rule 22c-1 under the 1940
Act. No brokerage commission, fee, or other remuneration will be paid
to any party in connection with the proposed transactions. Further, the
transactions will be reviewed by the Chief Compliance Officer of the
VIP Trust on behalf of the VIP Trust's Board of Trustees and will be
reported to VIP Trust's Board of Trustees in the same manner as any
other Rule 17a-7 transaction involving the New Fund would be reported.
10. The proposed transactions also are reasonable and fair in that
they will be effected in a manner consistent with the public interest
and the protection of investors. Contract owners will be fully informed
of the terms of the Substitution and they will be provided a prospectus
for the New Fund. In addition, contract owners will have the
opportunity to make a free transfer from the New Fund to any other
available Investment Option offered under their Contract, subject to
any Investment Option allocation restrictions under their Contract,
during the Free Transfer Period.
11. The section 17 Applicants also submit that the Substitution is
consistent with the policies of the Replaced Fund and the VIP Trust as
recited in the current registration statement and reports filed under
the 1940 Act.
12. In addition, section 17 Applicants submit that the proposed
Substitution is consistent with the general purposes of the 1940 Act as
stated in the Findings and Declaration of Policy in section 1 of the
1940 Act. The proposed transactions do not present any of the
conditions or abuses that the 1940 Act was designed to prevent.
Securities to be paid out as redemption proceeds from the Replaced Fund
and subsequently contributed to the New Fund to effect the contemplated
in-kind purchases of shares will be valued in accordance with the
requirements of Rule 17(a)-7. Therefore, there will be no change in
value to any contract owner as a result of the Substitution.
Conclusion
For the reasons and upon the facts set forth above, the Applicants
and the section 17 Applicants believe that the requested order meets
the standards set forth in section 26(c) and section 17(b),
respectively, and should therefore, be granted.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-26390 Filed 11-4-08; 8:45 am]
BILLING CODE 8011-01-P
